What's Next After My Student Loan Was Sold to Another Company?

By Jennifer Calonia · October 11, 2023 · 6 minute read

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What's Next After My Student Loan Was Sold to Another Company?

If your student loan was sold to another company, you will be notified of your new servicer and make your same monthly payment to them. Your old lender will send the monthly payments to your new lender while this transition occurs, but it’s still ultimately up to you to make sure it’s getting to the new lender by the payment due date.

Selling student loans between companies is a common practice, but learning that your loan was sold to another company might feel jarring if you aren’t prepared for what this entails. If a student loan transfer occurs while you’re paying back your loan, here’s what you should know.

Student Loans Explained

Student loans are an installment-based financing option for students who don’t have cash on-hand to pay for their education. Federal loan funds are offered by the Department of Education, such as Direct Loans. You can also borrow private student loans from non-government sources, such as banking institutions, credit unions, and online lenders.

When you borrow a student loan, the lending company provides you with a lump-sum loan disbursement to pay for school. In exchange, you agree to make incremental monthly payments to the lender for the principal loan balance, plus accrued interest. Your repayment period is predetermined and is on your loan agreement. Typically, you’ll have multiple years to repay your student loan in full.

Most federal student loans, such as Direct Subsidized Loans and Direct Unsubsidized Loans, are not due until you graduate, withdraw, or drop below half-time enrollment. You will also have a six-month grace period on these loans. Private student loans typically are not due while in school, either, and may come with their own grace period. This will vary by lender, so make sure to look at all the details of the loan before signing.

How Selling Student Loans Works

While you’re engaging with your lender or servicer during the repayment period, a separate process can take place behind the scenes among lenders.

Whether you have federal or private student loans, the existing company that owns your loan might sell or transfer your student loans to another lender or servicer. How selling student loans works is essentially how it sounds. The current owner of your loan sells the loan account for the cost of the loan balance, plus an additional fee based on the loan terms.

Lenders sell the student loans they create to get the account off of its balance sheet and to increase their liquidity. Since the loan is sold at a premium, the original lender uses that money to create more loans for new borrowers.

Your Loan Servicer After a Student Loan Transfer

The new company that purchased your loan might technically be your lender and loan servicer; in this case, you’d make payments directly to your new lender.

Conversely, your new lender might have purchased your loan, but hired a third-party company to service the loan. In this scenario, you’d send your monthly payments to the third-party servicer that’s partnering with the loan company.

What to Do If Your Student Loan Is Transferred to Another Company

Transferring lenders shouldn’t greatly impact you or the terms of your loan. During the time leading up to the official transfer date and shortly afterward, however, you can protect yourself with a few simple steps.

Expect an Alert From the Company

Your current loan company should communicate the student loan transfer in advance. Typically, you’ll receive an email or mailed letter which details the new company’s name and contact information, transfer date, and possibly payment instructions for your repayment plan.

During this preliminary period, continue making payments based on your usual due date. If you just stop paying your student loan, you risk incurring late payments or delinquency.

Make Sure It Is Not a Scam

When public announcements about student loan transfers are released, scammers might take advantage of unsuspecting borrowers by posing as their new lender or servicer.

For example, you might receive an unsolicited phone call from a scammer alleging that they need your credit card number to set up your student loan account for auto-pay.

The best way to avoid scams for student loans during a transfer is by confirming the new company’s name and contact information directly with your original lender.

Contact New Company

Once you’ve confirmed who’s taking over your student loans, reach out to the new company to ask how you should make payments once your loan is transferred to its system.

After the transfer takes place, create an online account through the company’s website to access your student loan details. From there, make sure your payment information is correct and that you’ve enrolled in automatic payments, if desired. Upon creating your account, double-check that the loan data the company received matches your records.

This includes your remaining loan amount balance, interest rate, term, and repayment plan. If anything is incorrect, contact your servicer immediately to correct the issue.

Can I Refinance My Student Loans If They Are Transferred?

If your student loan was sold and you are dissatisfied with your experience with the new company, refinancing can be an option.

Refinancing student loans lets you transfer your student loan to another lender. The difference with this type of transfer is that it creates an entirely new loan in place of your old one. With a new refinance lender, your loan details, such as interest rate and terms, will change.

No two lenders have the exact same refinance student loan offer. Borrowers with a strong credit profile and low debt-to-income ratio, however, can qualify for the most competitive interest rates.

If you choose to refinance your federal student loans with a private lender, you will lose access to certain federal benefits, such as student loan forgiveness and income-driven repayment plans. If you are currently using these benefits or plan to in the future, it is not recommended to refinance your student loans.

Refinancing Your Student Loans With SoFi

Selling student loans is ultimately one way in which financial institutions can secure enough liquidity to create new loans for students. Although you don’t have control over whether your loan is sold or not, it doesn’t affect the fine details of your student loan debt. You’ll still owe the amount that’s unpaid for the duration of your term and be charged the same rate.

You do, however, have the option to refinance your student loans with a new loan and new lender. If you do choose to refinance, consider SoFi. Refinancing with SoFi lets you access low rates and it only takes two minutes to see if you prequalify.


What happens when your student loan gets sold?

If your loan was sold to another company, your original loan’s unpaid balance, interest rate, and repayment terms remain the same. You’ll need to direct your payments to the new company if it’s also servicing your loan. If the new company purchased your loan, but is not servicing it, reach out to them to confirm where your payments should be sent.

What happens when student loans are transferred?

Your student loan details, including your outstanding balance, interest rate, and repayment period, won’t change during a student loan transfer. Before the transfer takes place, you’ll receive a notice from your lender or servicer. Once the transfer is complete, check your loan details to ensure it’s accurate, and confirm where to send future payments so they arrive on time.

Can a student loan be sold to a collections agency?

Yes. Student loans that are in default — meaning the borrower has stopped making payments for an extended period — can be sold to a collections agency. The collection agency will take every legal measure to collect the unpaid debt, including suing you in court.

Photo credit: iStock/LumiNola
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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