Quick Answer: When student loan servicers change, your loans can be automatically placed in administrative forbearance for up to 60 days without your consent. During that time, interest keeps accruing. Over 30 million borrowers experienced servicer transfers in 2022-2023, and more than 1 million were transferred from MOHELA in 2024 alone. If you don’t act quickly, you could end up owing more than you expected.
Your Loans Might Be in Forbearance Right Now
A New York City graduate recently discovered something alarming: her student loans had been placed into forbearance without her knowledge or consent. According to Yahoo Finance, she had been diligently making payments to her servicer Nelnet when her loans were suddenly transferred to a new servicer, CRI (Central Research Inc.). When she set up her new account, she found her loans sitting in administrative forbearance — a status she never requested.
The problem? During forbearance, interest keeps piling up on your balance. And this isn’t an isolated case.
How Big Is This Problem?
According to CNBC, more than 30 million student loan borrowers saw their loans transferred to a new servicer in 2022 and 2023. In 2024, over 1 million more were moved from MOHELA to other servicers. And GAO data shows approximately 9 million borrowers are currently in some form of forbearance.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Sep 16): The truck was $28,999 online. At the desk it’s $31,400. As of yesterday, the FTC says the ad was the lie.
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
Each one of those transfers can trigger an automatic administrative forbearance — and with it, silent interest accumulation.
The Daily Money Brief — Free, at 10 AM
Money you may be owed, scams to dodge, and the fine print decoded — the consumer money news that affects your wallet, every weekday.
Why This Happens
When the Department of Education moves your loan from one servicer to another, the new servicer typically places your account in administrative forbearance for up to 60 days while the transition completes. The stated purpose is to prevent you from being marked delinquent if your payments go to the wrong servicer during the switch.
That sounds reasonable on the surface. But here’s what they don’t emphasize: interest continues to accrue during that entire period.
The Hidden Cost: If you have $40,000 in student loans at 6.5% interest, a 60-day administrative forbearance means roughly $425 in additional interest. That interest can capitalize — meaning it gets added to your principal balance, and you start paying interest on the interest.
The MOHELA Problem
MOHELA, which previously managed Public Service Loan Forgiveness, has been at the center of transfer chaos. According to Newsweek, the Department of Education confirmed it would be transferring additional borrowers away from MOHELA, which has faced intense criticism for sending late or incorrect billing statements.
Some MOHELA borrowers saw their balances surge by thousands of dollars after receiving notices indicating continued interest accrual — even when they were told their forbearance was supposed to be interest-free.
The Bigger Picture: Student Loan Repayment Crisis
This forbearance trap is just one piece of a larger mess. According to a CFPB report:
- Only 13 million of roughly 35 million borrowers are in current repayment
- Over 7 million are at least 30 days delinquent
- Another 6 million are in default
- The active repayment delinquency rate hit 29.5%, up from 12.7% in December 2019
Credit Score Damage: According to Protect Borrowers, delinquent borrowers with credit scores above 720 saw an average 137-point drop when the Education Department began reporting delinquencies to credit bureaus in September 2024. Borrowers with scores below 600 saw a 71-point drop.
What You Need to Do Right Now
- Check your loan status at StudentAid.gov — Log in and verify your current servicer, balance, and repayment status. If you see “forbearance” and you didn’t request it, your loan may have been transferred.
- Contact your new servicer immediately — Set up your account and resume payments as soon as possible. Don’t wait for the forbearance to expire on its own.
- Make a payment even during forbearance — The NYC grad in the Yahoo Finance story made her regular payment immediately rather than waiting, which prevented extra interest from accruing.
- Re-enroll in autopay — If you had autopay with your old servicer, you’ll need to set it up again with the new one. Autopay usually gives you a 0.25% interest rate discount.
- Verify your information — Check that your monthly payment amount, total balance, interest rate, and contact information are all correct with the new servicer.
- Request an interest review — If interest accrued during the transfer, contact your new servicer and ask them to review the charges. If the forbearance was applied in error, they may reverse the interest or credit your account.
If Your Servicer Won’t Help
File Complaints With
- Federal Student Aid Feedback Center — The Department of Education can investigate
- CFPB Complaint Portal — The Consumer Financial Protection Bureau tracks servicer issues
- Your state Attorney General — States have been increasingly active on student loan servicing issues
Don’t Ignore It Because
- Unpaid interest capitalizes and grows your balance
- Delinquency now gets reported to credit bureaus
- Credit score damage can be severe (137-point drops reported)
- Default has long-term consequences including wage garnishment
Free Tool — Wage Garnishment Calculator: Worried about your paycheck being seized? The free Wage Garnishment Calculator shows exactly how much creditors can legally take in your state — and some states prohibit garnishment entirely. Calculate My Risk →
More Changes Coming in 2026
Student loan borrowers face additional changes this year:
- Forbearance limits tightened — New rules cap forbearance at 9 months within any 2-year period (previously up to 12 months at a time)
- SAVE plan ending — After a December 2025 settlement, the income-driven repayment plan is being wound down. Borrowers will need to transition to other plans
- Forgiveness is taxable again — The tax exemption on student loan forgiveness expired at the end of 2025. Forgiven amounts in 2026 may count as taxable income
- Grad PLUS loans eliminated — After July 1, 2026, new graduate students won’t be able to borrow through Grad PLUS
Not Sure Where You Stand? If you’re dealing with student loans on top of other debts, take the free Find Your Path quiz. It takes less than a minute and gives you a personalized starting point based on your actual situation — not generic advice.
Sources
- Yahoo Finance — NYC grad’s forbearance discovery during servicer transfer
- CNBC — Student loan servicer transfers and what borrowers should know
- CFPB Student Loan Return to Repayment Report — November 2024 borrower repayment data
- U.S. GAO — Post-pause repayment and forbearance statistics
- Newsweek — MOHELA transfer updates and borrower impacts
- Protect Borrowers — Credit score impact data for delinquent borrowers
Frequently Asked Questions
Why were my student loans put in forbearance without my permission?
When the Department of Education transfers your loans from one servicer to another, the new servicer typically places your account in administrative forbearance for up to 60 days. This is supposed to prevent you from being marked delinquent during the transition, but it happens automatically without requiring your consent.
Does interest accrue during administrative forbearance?
Yes. Unlike some types of deferment, interest continues to accrue on all loan types during administrative forbearance. That interest can capitalize when the forbearance ends, meaning it gets added to your principal balance. You can make payments during the forbearance to prevent this.
How do I know if my student loan servicer has changed?
Check your account at StudentAid.gov to see your current servicer. You should also receive a notice from both your old and new servicer, but these notifications don’t always arrive on time. If your autopay stopped or you haven’t received a bill, your loan may have been transferred.
What should I do if interest accrued during my servicer transfer?
Contact your new servicer and request a review of any interest that accrued during the administrative forbearance. If the forbearance was applied in error or lasted longer than it should have, they may reverse the interest charges. If your servicer won’t help, file a complaint with the Federal Student Aid Feedback Center or the CFPB.
TL;DR: Student loan servicer transfers can silently put your loans into forbearance, accruing interest you didn’t agree to. Over 30 million borrowers have been affected. Check your loan status at StudentAid.gov right now, contact your servicer, and make payments during any forbearance period. Don’t let a bureaucratic transfer cost you hundreds or thousands in unexpected interest.
(Source: Yahoo Finance / CNBC / CFPB)
Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
