A Brief History
FedLoan Servicing is one of only four approved loan servicers for all student loans made by the federal government. It currently manages the largest portfolio of federal student loans in the US as well as the government’s Public Service Loan Forgiveness program. The company was originally established as The Pennsylvania Higher Education Assistance Agency (PHEAA) in 1963 and quickly became one of the leading student aid organizations in the US. PHEAA currents services loans for millions of student borrowers and thousands of colleges and ugniversities.Today, PHEAA services student loans through two different entities: American Education Services (AES) and FedLoan Servicing. AES was created to guarantee and service FFELP loans and private student loans made through its lending partners. FedLoan Servicing was created to work with the Department of Education as a primary point of contact to help borrowers manage their federal student loans.
Problems With FedLoans
Once your repayment term begins with Fedloan Servicing, so do the problems. Fedloan Servicing currently has a 97% negative rating on the BBB, has been sued by the state of Massachusetts for failing to help borrowers with their public service loan forgiveness, and has been blasted by the CFPB for mishandling of their borrowers federal student loans. There is a Facebook page set up for Fedloan borrowers to leave their complaints, where they currently have a 1.2 out of 5 stars.
How would you rate the performance of your student loan servicing company? (Navient, Nelnet, Great Lakes, etc…)
— StudentDebtCrisis (@DebtCrisisOrg) April 20, 2017
Fedloans Servicing Handles All Public Service Loan Forgiveness
Currently, all employment certifications for the PSLF program must go through Fedloan Servicing (see section 7 of the PSLF employment certification form). When an individual is relying on one company for their student loan forgiveness, it’s increasingly alarming how that one company can make so many errors. There are many reports of
- Borrowers being put into the wrong payment plans which do not count towards forgiveness
- PSLF Applications being “lost” in the mail
- Borrowers being wrongly denied forgiveness
- Borrowers not being informed that they may qualify for lower monthly payments via the income drive repayment plans
- Borrowers not being told that the 120 qualifying payments for PSLF do NOT need to be consecutive payments
- Borrowers being put into forbearance rather than an income drive repayment plan while out of work and qualifying for a $0.00 monthly payment
- Payments being applied incorrectly
- Customer service reps that do not know the programs well enough to help borrowers, often resulting in a financial harm for the borrower
Since the program started a decade ago, the first recipients of public service loan forgiveness would qualify to begin in October 2017. Fedloan Servicing should be actively contacting its borrowers to inform them of this via email, phone calls, social media, and any other forms possible. To receive PSLF you do not need to pre-apply and are only responsible to apply once after your ten years of service. Millions of people right now qualify for this forgiveness, but is it actually happening?
Changing Your Student Loan Servicer
Thankfully, you have options to change your loan servicer. The easiest way, which also makes your loans eligible for PSLF is to apply for the Direct Loan Consolidation program. It’s a federal program that will take all your student loans, and bundle them into one new loan with a weighted average interest rate. When applying for the consolidation you are able to select which servicer you would like your loans to be sent to between Nelnet, Fedloans, Navient or Great Lakes. There is a caveat, during the application process it will ask if you plan on applying for PSLF and if so your loans will be sent to or stay with Fedloans. If you wish not to have your loans with Fedloans, you shouldn’t select this. Your loans do not need to be with Fedloan Servicing to apply for PSLF. Please read the qualifying payments section 6 of the PSLF certification form. You can apply on your own for a Direct Loan consolidation for free, or you can give us a call and we will connect you with a private organization who can offer assistance for a fee.
Another option is to apply for a private student loan consolidation. This would remove any federal student loan benefits you have and eligibility for income-driven repayment plans and forgiveness programs. If you are unable to take advantage of any of the forgiveness programs offered by federal student loans, then considering a private consolidation could be a smart move. Through a private consolidation, you may benefit from
- Reduced interest rate
- More favorable repayment terms
- Better customer service
In any event, it’s important to consider that there is no one size fits all solution. Each person needs to evaluate their own situation and decide accordingly after researching all their options.
Here’s a brief summary of how FedLoan Servicing works:
- Borrowers apply for a federal student loan. This involves completing a FAFSA application, choosing a school, signing a Master Promissory Note (MPN), and going through entrance counseling before receiving their actual federal loans.
- The school receives the funds and the borrower is assigned a federal loan servicer. At this point, FedLoan Servicing may be assigned as the loan servicer and would then be the primary point of contact going forward. Borrowers will need to set up an account with FedLoan Servicing to manage their loans and make payments after graduation. No student loan payments are due while the borrower is still in school (as long as they are enrolled at least half-time).
- After graduation, borrowers enter a grace period. This is typically a 6-month period where students can complete exit counseling and begin looking for work before their repayment term begins.While payments are not required during this period, FedLoan Servicing encourages borrowers, if possible, to at least pay the accrued interest so it is not added to the principal after their grace period ends. During this period, FedLoan Servicing will send the borrower a Repayment Obligation Letter by mail which details all of their repayment information for the term of their loan.
- The repayment term begins. After the grace period ends, FedLoan Servicing will begin sending borrowers their monthly student loan bills. These are typically sent out several weeks in advance so they can make each payment on time. All payments will be made directly to FedLoan Servicing.
*If a borrower is having trouble making payments at this point, they may be eligible for one of several federal Income-Driven Repayment options currently available.
Once the student loan is paid off completely, FedLoan Servicing will send the borrower a Paid In the Full letter as proof of total repayment.
FedLoan Servicing offers many options to help borrowers with their federal student loans, including:
- Extensive student loan information and resources
- Loan consolidation
- Repayment schedule and estimator tool
- Income-Driven Repayment programs
- Deferment and forbearance options
- Loan forgiveness and discharge programs
- Public Service Loan Forgiveness
- TEACH Grants
- Payment management and billing
- Payment history and tax documents
- Direct debit
- Delinquency and default
- Credit report dispute services
Borrowers can access these services through their account at FedLoan Servicing anytime through their online portal.
Reviews of FedLoan Servicing
BBB Rating: (Not Rated)
Consumer Affairs Rating: 1 star (out of 5)
Lendedu.com Rating: 1.5 stars (out of 5)
For more information, or to speak with someone at FedLoan Servicing directly, you can contact them by email or through the information below:
1200 N 7th St
Harrisburg, PA 17102