My FedLoan Servicing Guide For Student Loans
Written by Lead Editor Jessica Baker
FedLoan Servicing was established as a way of supporting the United States Department of Education in servicing student loans that are federal government owned. The Pennsylvania Higher Education Assistance Agency established FedLoan Servicing. For this reason, you may sometimes hear of this servicing referred to as PHEAA servicing.
There are two types of federal loans that are typically serviced by Fed loan. They are:
- Direct loans that are provided by the United States Department of Education without going through a third-party lender.
- Loans that originate from the Federal family education loan program (FFELP). These are loans that have been sold and transferred following The Ensuring Continued Access to Student Loans Act (a.k.a.: ECASLA). This type of loan through third-party lenders was available from 2008 through 2010.
Making A FedLoan Payment
There are a number of ways to make a payment to your FedLoan balance. They include:
- Using a third-party bill payer
- Paying by mobile device
- Using direct debit
- Paying by phone (1-800-699-2908)
- Paying by mail
- Paying online
Of these, direct debit is presented as being the most sensible and easiest. When you sign up for direct debit, you will get a discount of 0.25% on your interest rate.
Additionally, you will not need to remember to make your payments. They will be automatically deducted from your checking or savings account.
The downside to this is that you will need to remember to keep enough money in your designated account to cover your payments.
SEE ALSO: How To Pay Off Student Loans Fast
Payments sent by mail must be done by check or money order with your account or co-signers account number on it. Make the payment to Fedloan Servicing and send to:
Department of Education
P.O. Box 530210
Atlanta, GA 30353-0210
To find the current payment options, see Pay by Phone or by Mail.
Paying In Advance Is Also An Option
You can also schedule future payments by phone or by using the account access option. It is possible to schedule as many as eight payments within two months time.
When you do this, will be able to schedule your payments for specific dates when you are sure you will have funds available in your account.
When using this option, you must remember that you cannot schedule a payment for weekend day or a holiday.
Making Accelerated Payments
You can always pay ahead on your Loan, without penalty.
When you pay ahead, you automatically reduce the amount of interest you will be paying within the life of your loan. Naturally, the more you can pay in advance the sooner your loan will be paid off.
When you prepay, you must also remember to pay your regular monthly payments.
Note: Even if you are paid ahead a great deal, you cannot skip your scheduled payment even if your statement says that your amount due is "zero dollars", you must keep up with your regular monthly payments in order to enjoy a reduction of the total amount of interest due and a reduction of the amount of time necessary to pay your loan off.
It’s important to note that you must keep on top of this yourself. If you are not diligent in keeping track of when and whether your direct payments are deducted, you can end up experiencing a multitude of complications.
Fedloan Deferment And Forbearance
If you absolutely must, it is possible to postpone your payments; however, it is better consider changing to an Income Driven Repayment plan (a.k.a.: IDR). This sort of plan can provide you with many of the same benefits as postponement.
For example you may be able to skip some payments and/or reduce the amount of interest due. Furthermore, if you have already missed some payments, you may be able to clear these delinquent payments.
If your situation continues to be untenable, participating in IDR program is one step toward loan forgiveness.
When you participate in loan deferment or forbearance, you will be able to postpone your payments temporarily in the event any of the following conditions apply:
- You are experiencing temporary financial hardship.
- You have been impacted by a natural disaster.
- You are deployed by the military.
- You are still enrolled in school.
- You are unemployed.
When you are in school, your deferment request will be automatically accepted. In other cases, you will need to fill out an application and meet specific qualifications for either forbearance or deferment.
If you have an endorser on your loan, you will be able to apply for a deferment on your own; however, if you wish to apply for forbearance, either you or your endorser can apply.
If your loan has a co-maker or cosigner, you must make the request for deferment or forbearance jointly.
When your payments are deferred for a subsidized Stafford or subsidized consolidation loan, your accrued interest will be paid by the government during the approved deferment period. Under a forbearance plan, you will be responsible for paying all interest on any loan type.
The Basics Of FedLoan Consolidation
If you have several different student loans, it may be a good idea to consolidate them. Consolidation can make your loan repayment easier and more affordable.
Here are some of the circumstances that might prompt you to seek out loan consolidation:
- If you have several loan servicers or several different types of federal loans, you can simplify the payment process by consolidating.
- If you have a great deal of student loan debt and/or varying interest rates on several loans, you may be able to reduce your overall interest rate by consolidating.
- If it is difficult for you to pay the total amount due on multiple loans each month, you may be able to lower your payment by consolidating.
SEE ALSO: Should I Consolidate My Student Loans?
Just as with any financial decision, there are good things and bad things about consolidation. When you consolidate, you naturally simplify your arrangement by reducing the number of bills you pay and only having to keep up with the terms and agreements of one servicer.
Additionally, when you consolidate you may be able to establish a fixed rate of interest.
On the downside, when you consolidate you will extend the length of your loan. This means more monthly payments for a longer period of time. This adds up to a greater amount of interest accrued over time.
You may lose some of your loan incentives, and if you were eligible for any military benefits you may lose those as well.
SEE ALSO: Banks That Refinance Student Loans
Student Loan Forgiveness Programs
One big plus of consolidating your loans is that when you consolidate them they become a direct loan. This makes them eligible For Public Service Loan Forgiveness (PSLF) if you meet all of the other requirements of the program.
To qualify for PSLF, you must currently be employed with a public service organization, or you must be planning to pursue a career in public service. Good examples include being or becoming a full-time Peace Corps or AmeriCorps volunteer.
If these conditions apply to you, then you may be eligible for forgiveness of the entire remaining balance on your student loans.
Here are some additional requirements you must consider:
- You must have a direct loan, which is the only type eligible to be forgiven. There are seven types of federal direct loan. All are eligible.
- You must have made at least 120, on-time, qualifying, full, monthly payments since October 1 of 2007.
- Your loan must not have ever been allowed to go into default status.
- You must make your payments using an eligible repayment plan such as:
- Income Contingent Repayment
- Income Driven Repayment
- Income-Based Repayment
- Standard Repayment Plan
- Revised Pay As You Earn
- Pay As You Earn
Other Direct Loan Repayment Plans in which the payment amount equals that which would have been required under a 10 year Standard Repayment Plan are also eligible.
There are also employment eligibility requirements for PSLF. You must be employed for an average of 30 hours a week. If you are working for a single employer, this may be adjusted to the amount of time that the employer considers to be full-time.
If you are working for two or more employers, you must work an average of 30 hours a week. If you are working for a charitable organization, it is important to note that you cannot include time spent in religious activities as work time.
You may also work for a public service organization such as a local, state, tribal or federal entity, agency or organization. Examples include public institutions of learning and nonprofit organizations.
Types Of Forgiveness Programs
Aside from public service loan forgiveness there are several other types of loan discharge and/or forgiveness for which you may qualify. They are:
Student Loan Forgiveness For Teachers
You may qualify for teacher loan forgiveness if you are teaching full time at an elementary or secondary school in a low income area.
This program may forgive part or all of your debt if you fulfill all work-related requirements.
Student Loan Disability Discharge
If you are totally and permanently disabled, you may qualify for complete forgiveness of your loan provided you are unable to work because of your disability.
Additionally, this may apply if you are a veteran who has been deemed unable to work because of a service related condition.
Additional occupations that may qualify:
- Government organizations
- Not-for-profit organizations
See details at PSLF Qualifying Employment
What Is Student Loan Discharge?
Discharge is somewhat different than loan forgiveness. With discharge, your monthly payments may be dismissed and you may even be eligible for refunds of payments you have made if your school has closed or if problems have been discovered in the running of the school.
For example if the school has made false claims regarding the benefits you may gain from the education receive, or if they have signed your name without gaining your authorization, you may be eligible for discharge.
Furthermore if they have promised you a tuition refund and then failed to make good on that refund, you may be eligible for discharge.
Additional qualifications include situations in which your loan was certified falsely because of identity theft or another crime.
Furthermore, if you are a parent or spouse of a victim of the September 11, 2001 terrorist attacks, you may be able to have qualifying loan amounts discharged.
How To Find Out More
To learn more about FedLoan Servicing, you can visit the FedLoan Help Center online and peruse the frequently asked questions.
You may contact FedLoan by email, postal service, fax or phone. To access links for this information, go to: https://myFedLoan.org/about/contact.shtml
Be sure to scroll all the way to the end of the page to be certain that you are selecting the right contact information for your situation. It differs depending upon whether you are an individual or a representative of a public, private, proprietary, graduate or professional school.
FedLoan Servicing Scam?
FedLoan is for real, but sometimes your emails look as if they are phishing scams. Unfortunately, they are often poorly constructed and break the cardinal rules of sending legitimate emails.
For example, the Direct Loan Servicing Center frequently sends out emails addressed to "Dear Borrower" rather than addressing each borrower by name. Additionally, they sometimes send out emails from an unknown email address.
See College Info Geek for Thomas Franks story!
For this reason, it is important that whenever you receive an email from the FedLoan Direct Loan Servicing Center, you should refrain from clicking on links.
Instead, go to the website via your browser, sign into your account and take the steps necessary to verify that the email is legitimate.
In this way, you can avoid unauthorized phishing scams. This is generally a good idea whenever anyone sends you an email asking you for information and requiring you to click on link.
Problems Borrowers Have Encountered with FedLoan Servicing
Some people complain about FedLoan Servicing for a number of reasons.
For one thing, when FedLoan takes over your loan you must re-sign up for all online statements and direct debit arrangements that you may already have had in place with your previous lenders.
Additionally, when you do this there is lag time involved. This often means that your direct payments may be missed for a couple of months unless you are right on top of it and make your payments manually.
Furthermore, if you were eligible for reductions in interest rates for being signed up for direct payments in the past you may lose that reduction.
Late Payments Via Direct Debit!
Another problem with direct debit is that sometimes payments are not applied in a timely manner. So, even though you may have your direct debit payment set up properly, your payments may not go through for as long as two weeks. This means your payment is late.
If you make a manual payment or payment by check in an attempt to pay your loan earlier, your account may not be automatically debited.
You can get around this problem with an "opt out” that will allow your direct debits to process even when you make additional payments; however, it takes numerous phone calls and certified letters to achieve this.
In addition to these problems, some borrowers report fluctuations in the amount of their automatic debit. These are strange and mysterious changes (e.g. a reduction in payment amount of about a dollar) that occur without reason and without explanation.
"It seems that FedLoan’s right hand doesn't know what its left hand is doing."
Even after your payments are being properly deducted from your checking or savings account, they may not be properly noted. When you log on to your FedLoan account you may find that it is labeled as delinquent.
These problems may be in part because FedLoan apparently has antiquated technology that does not process changes, adjustments, updates and payments quickly and accurately.
Customer Service Is Horrible
Customer service is apparently sadly lacking. Many people report that when they try to resolve problems with FedLoan’s customer service line, the clerks are quite rude and apparently don't know much about FedLoan programs.
Complaints of being shuffled from one clerk to another without actually accomplishing anything are quite common.
How My FedLoan Confusion Can Cause You Big Trouble
Okay, so let's say that you get so confused that you just stop paying back your loans. What happens if you don't pay off your student loans?
Unfortunately all of these things negatively affect your credit rating. FedLoan is a loan servicer so they do report all of their interactions with you to the major credit bureaus.
This is why it's very important that you stay right on top of your credit rating and make corrections to your credit reports as needed.
If you happen to find work, you could also be subject to Student Loan Wage Garnishment and money will be taken from your pay check before you get it!
It is also important that you fill out all paperwork completely accurately. If you check the wrong box, this minor error can cause you problems throughout the life of your loan.
You could end up having to reapply and fill out form after form in order to continue having your loan service.
Apparently, failure to fill out paperwork correctly can also result in having grants being converted into loans suddenly and unexpectedly, causing you all kinds of difficulties.
For example, some borrowers who have participated in PSLF complain that FedLoan has cited incorrectly filled out forms or un-received forms as reasons for withdrawing grants and converting them back into loans.
This situation apparently happens over a period of years and completely unbeknownst to the borrower.
When this happens, a borrower might fill out all paperwork, send it in and proceed to fulfill the other requirements of the loan-to-grant arrangement only to find that after several years their efforts have been wasted because FedLoan is claiming that paperwork has been incorrectly filled out or has not been received.
Be advised, they will not go out of their way to notify you of this. Instead, years may pass with interest and penalties mounting while you go along merrily thinking all is well!
This is why it is extremely important to double check the filling out of all paperwork with a FedLoan representative and to send all documents by certified mail and retain all certified mail receipts.
Some borrowers also complain that they have lost track of some of their loans because they were under the impression that all student loans are automatically consolidated to FedLoan when FedLoan Services are engaged. This is actually not true.
It's important that you review all of your student loans and make sure that they are all included or that you know how and where they are being serviced. Otherwise you might easily lose track and fall behind.
Are There Federal Student Loan Alternatives?
It’s easy to see that there are a number of good reasons why many student loan holders seek alternate student loan refinancing options.
One such option is called "Credible". With this online service, you simply fill out one form and then receive multiple authors from high quality private lenders.
For the most part, borrowers who have opted for these professional services are happier with the results.