Banking giant Wells Fargo recently announced its exit from the student loan business. Current Wells Fargo borrowers should expect some changes to their student loans.
The good news for current Wells Fargo customers is that for the most part, making the changes will be a minor overhead rather than a major problem.
Some borrowers may also have an opportunity to get rid of the inconvenience.
Changes for Wells Fargo Borrowers
Wells Fargo sells all of its student loans to investors. Firstmark will service the student loan.
Wells Fargo has not announced a specific date for the move, but will stop accepting all student loan applications as of January 21, 2021.
From the borrower’s point of view, this transfer means no more bills from Wells Fargo. Instead, Firstmark takes care of all student loan issues, billing and issues.
However, the loan terms do not change. The move should not affect the interest rates or the monthly amount.
Preparing to move from Wells Fargo to Firstmark
If I were a Wells Fargo customer I would do the following:
- Cancel all automated payments – Some people schedule monthly payments from their bank to Wells Fargo every month. Others authorize Wells Fargo to automatically withdraw their payment every month. Borrowers should cancel both services. Payee information for auto banking payments is changing and Wells Fargo has no reason to continue accessing bank accounts or obtaining information.
- Update my contact information with Wells Fargo – Wells Fargo can send important letters or emails during the transition. The lack of critical information can lead to defaults on payments and possible late fees or negative credit reports. Up-to-date contact information will help avoid problems.
Ultimately, the process is an inconvenience for the borrowers. You’ll need to monitor the transition to make sure you are never charged twice and to make sure you don’t skip a monthly payment.
It’s not ideal, but in most cases not a catastrophic situation.
The major potential disadvantage for borrowers
A borrower’s lender and servicer can have a significant impact on their student loan experience.
In most cases, the impact will be nothing more than the company that gets paid each month.
However, for borrowers who are struggling, the student loan companies have a tremendous impact.
Wells Fargo is a big bank. They have spent millions on advertising to improve their reputation with customers. For student loan borrowers, this means Wells Fargo may have an incentive to work with borrowers who are struggling. Although the loan agreement does not require additional assistance, sometimes lenders find a way to meet borrowers’ needs.
Moving to Firstmark services for investor loans could mean less flexibility. In previous research on Firstmark, I have noticed complaints from borrowers about Firstmark’s lack of flexibility and help. Outside investors may not care if consumers hate them. You can instruct Firstmark to strictly enforce all terms of the loan agreement.
Stopping the credit transfer to Firstmark
Many borrowers may want to prevent the move to Firstmark.
After all, the contract they signed was with Wells Fargo. Can’t borrowers stop selling to investors or switch to Firstmark?
Unfortunately, it is almost certainly impossible for borrowers to stop Wells Fargo. Selling debt from one lender to another is a standard business practice.
I have not personally reviewed any Wells Fargo student loan agreements, but I would be shocked if a provision allowed borrowers to prevent the transfer.
The only realistic way for borrowers to prevent transfer to Firstmark is to switch from Wells Fargo.
Simplify the process and find a better loan
Borrowers can take control of the situation by refinancing their Wells Fargo loans.
The traditional motivation behind refinancing is to get a lower interest rate on your student loan. When this happens, borrowers can potentially get a lower interest rate and avoid potential problems with Wells Fargo / Firstmark Services.
When refinancing, the new lender pays off the old debt and the borrower repays the new lender under a new loan agreement. Borrowers must take the time to apply to a new lender and set up payment information with the new lender. However, the refinancing company is responsible for repaying existing loans.
Refinancing enables borrowers to:
- Choose your next lender,
- Lower interest rates and;
- Avoid the headache of transitioning from Wells Fargo to Firstmark.
The best refinancing rates are currently available from the following lenders: