fedloan overview
FedLoan was one of the largest student loan servicers in the country. As servicer for the U.S. Department of Education, FedLoan managed loan repayment and performed customer service and processing for Public Service Loan Forgiveness (PSLF) applications. Though it stopped serving federal loans in 2022, its influence on student borrowers continues to loom large. This article details FedLoan’s history, what it does, what to watch out for and its place in student loan management.
What Is FedLoan?
FedLoan was one of a handful of student loan servicers that managed federal student loans issued through the U.S. Department of Education. It was run by the Pennsylvania Higher Education Assistance Agency (PHEAA), a quasi-governmental agency that loan-serviced millions of borrowers.
FedLoan, which was established in 2009, received contracts to manage federal student loans, including direct loans and loans eligible for forgiveness programs such as PSLF. It handled payments, offered repayment plans and helped borrowers with loan-related questions.
The Role of FedLoan in Student Loan Servicing
FedLoan offered a number of services to student loan borrowers, including:
Loan Repayment Management
FedLoan handled monthly loan payments, allowing borrowers to make payments online, by mail or by automatic withdrawal. It also tracked payments for borrowers and provided statements.
fedloan Repayment Plan Assistance
Borrowers had several repayment plans they could choose from, including:
- Standard Repayment Plan: Payments are fixed over a 10-year period.
- Income-Driven Repayment (IDR) Plans: Payments tied to income and family size.
- Graduated Repayment Plan: Starting payments that are lower and go up over the years.
- Extended Repayment Plan: Reduced monthly payments with a longer repayment period.
FedLoan helped borrowers choose the best repayment plan for their circumstances.
The Public Service Loan Forgiveness (PSLF) Program
Among FedLoan’s most important duties was overseeing the PSLF program. This program forgives the remaining loan balance if an employee makes 120 qualifying monthly payments; it is available to many public service workers, including those who work for the government and nonprofits. To keep borrowers eligible, they had to resubmit annual employment certification forms for the federal review, which FedLoan was responsible for processing.
Processing Deferment and Forbearance
For many borrowers experiencing financial difficulties, FedLoan offered deferment or forbearance — the opportunity to halt or reduce payments for reasons like unemployment, economic hardship or medical problems.
FedLoan Controversies and Issues
FedLoan, which was critical to servicing student loans, was not without its share of criticism over the years. Many borrowers complained of bad customer service, processing errors and problems getting their loans forgiven.
PSLF Application Issues
By far, the most significant complaint about FedLoan was the way it processed PSLF applications. Many borrowers were denied forgiveness for technicalities, paperwork mistakes or miscommunication of program requirements. Some said their qualifying payments were miscounted, which prolonged repayment.
Customer Service Complaints
FedLoan came under fire for customer service representatives who were unhelpful, long wait times and inaccurate information given to borrowers. Most borrowers had trouble getting correct information on repayment options and forgiveness programs.
Processing Delays and Errors
Borrowers routinely said there were delays in processing payments, recertifying income-driven repayment plans and completing PSLF employment certifications. Those delays left borrowers missing deadlines or locked into wrong repayment plans.
fedloan Legal and Government Scrutiny
FedLoan was a perennial target of lawsuits and government inquiry for mishandling student loans. In 2017, the Massachusetts Attorney General sued PHEAA, accusing the company of deceptive practices in processing PSLF applications. The U.S. Department of Education had also identified problems with FedLoan’s servicing practices.
fedloan Exit from Federal Loan Servicing
In 2021 FedLoan said it would not renew its contract with the U.S. Department of Education and would leave the business of servicing federal student loans. Millions of borrowers were affected by this decision, and their loans were transferred to other servicers like MOHELA, Aidvantage and Nelnet.
The switch sparked worries that there could be errors, slow processing and confusion for borrowers. The U.S. Department of Education tried to facilitate a smooth transfer of loans, but there were plenty of borrowers who still encountered issues with their loans after the transition was complete.
Who Was Affected by FedLoan’s Exit?
FedLoan’s exit from the student loan servicing business resulted in major changes for borrowers:
- Loan Transfers: Borrowers had to get used to new loan servicers, sometimes resulting in disruptions in payment processing.
- PSLF Applications: Many borrowers had to re-submit documents and verify their loan history with new servicers.
- Inconsistent Experiences: Servicers have adopted new customer service practices, but borrowers have had mixed experiences; in some cases, they faced new challenges navigating their loans.
What Borrowers Should Do Now That FedLoan Is Leaving
If you were a borrower from FedLoan, here are steps you can take to help make the transition as smooth as possible:
- Verify Your New Loan Servicer You can check your loan status on the Federal Student Aid (FSA) website to see which loan servicer holds your loan and to make sure your contact information is updated.
- Set up an account with your new servicer You can follow your payments, change repayment plans and update your loan details by creating an online account with your new servicer.
- Review Your Loan Details Make sure your loan balance, repayment plan, and PSLF progress are accurate after the transition.
- Keep Records of Payments and Communications Keep records of your payment history, PSLF applications and all communication with your loan servicer in case of future disputes.
- Stay Updated on Loan Forgiveness Programs Follow news from the U.S. Department of Education about PSLF, IDR forgiveness and new policies that may affect your repayment options.
Conclusion
FedLoan was the main servicer during the period in which borrowers needed to apply to have their loans forgiven presuming they were on the Public Student Loan Forgiven program (PSLF) and devoted their careers to teaching or public service and Federal loans had to be forgiven. Its departure from loan servicing was a significant change for student borrowers, forcing them to move to new servicers. Borrowers will need to stay proactive with managing their loans, checking theirs servicer information, and monitoring repayment plans.
Although FedLoan is no longer a student loan servicer, its involvement in the student loan system is still a key component in the conversation around student debt and loan forgiveness programs in the U.S.
