If you’re a student or if you work for a college, university, or vocational school, chances are you may have heard about the new laws regarding student loan servicing. Lawmakers in a number of states are enacting regulations in an effort to standardize loan servicing practices and curtail deceptive practices. If you’re wondering what these laws mean and how they might affect you, you’re not alone. The loan servicing experts at Partners Financial Services are here to help you make sense of it all. Keep reading to learn more, and then give us a call if you have additional questions.

To start, let’s review a few basic definitions:

Student Loan – A loan extended to a borrower for means of financing postsecondary education expenses.

Student Loan Servicer – This is defined as “any person, wherever located, responsible for the servicing of any student education loan to any student loan borrower.”

Servicing – Anyone engaging in one or more of the following activities:

  • Receiving any scheduled periodic payments from a student loan borrower and applying those payments to the borrower’s account
  • Maintaining account records for the loan and communicating with the borrower during a period when no payment is required
  • Interacting with a student loan borrower to facilitate loan servicing, including activities to help prevent default

New Student Loan Servicing Rules

In recent years, loan servicers have come under increased scrutiny and many states are now rallying for better regulation and transparency. Up to this point, the lack of loan servicing regulation has been an oversight that many feel is long overdue.

There are several new requirements and responsibilities under the new law. These requirements are an attempt to create a more level playing field and support the rights of student loan borrowers. Some of the key takeaways of the new law include:


Any student loan servicer operating under contract with the U.S. Department of Education must obtain a license from the Commissioner.
Creation Of a Student Loan Ombudsman

The Commissioner is directed to designate an ombudsman whose duties include:

  • Receiving and reviewing complaints from student loan borrowers
  • Compiling complaint data
  • Helping borrowers to understand their rights and responsibilities
  • Analyzing new federal, state, and local laws and recommend necessary changes
  • Establishing a borrower education course by October 1, 2020
  • Submitting an annual report

Servicer Requirements

Under the new law, several new servicer requirements have been outlined, including the need to:

  • Maintain student loan records for at least two years following final payment or assignment of the loan
  • Get instructions from the borrower on how to handle overpayments
  • Apply partial payments as specified by the law
  • Follow specified requirements in the event that the name of the loan servicer changes
  • Implement procedures to verify that the servicer has received certain information
  • Evaluate borrowers for eligibility for income-based repayment programs before placing them in default

Prohibited Actions

The law has identified several actions that are deemed as being unfair or deceptive. Some of these actions include:

  • Misapplying payments to the outstanding loan balance
  • Misrepresenting the loan amount or nature of terms
  • Reporting inaccurate information to a credit bureau that harms a borrower’s creditworthiness
  • Failing to report both favorable and unfavorable payment history


The new law provides student loan borrowers with a means for obtaining retribution in the event they are the subject of deceptive practices or loss. For instance, if a borrower has suffered monetary loss as a result of a servicer’s unlawful practice, they are able to bring an action or assert a counterclaim against the servicer.

Trust Partners Financial Services

In the wake of the new regulations, you may be wondering how to find a student loan servicing partner you can trust. At Partners Financial Services, our mission is to provide our clients and consumers with ethical, consumer-driven loan servicing. Our company started over 25 years ago as a student loan origination and financing agency, and we’ve been helping people ever since. You can trust that your business will be in good hands when you choose to work with us.

If you have additional questions about student loan servicing or you are seeking more information about the new loan servicing laws, please give us a call. We would be happy to answer any questions you may have!

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