Understanding Changes to FedLoan Student Loans
@craftedbygc | Unsplash
No, federal student loans are not going away.
In July 2021, student loan servicer FedLoan announced that it would no longer be servicing federal student loans, leading many borrowers to wonder what will happen to their loans. Some even worry that the federal student loan program is going away entirely. This is a particular concern of borrowers participating in Public Student Loan Forgiveness (PSLF), as FedLoan has been the only servicer for that program.
With the December 14, 2021 transfer deadline quickly approaching for around 8.5 million borrowers, I thought it would be a good idea to clear up some of the confusion.
Here’s what you need to know
Federal student loans aren’t going away
The first thing to understand is that FedLoan is NOT the same thing as the Direct federal student loan program. It’s easy to confuse FedLoan with federal student loans, but it’s important to understand the difference.
Federal Student Loans: a student loan program through the U.S. Department of Education.
FedLoan: a company that the U.S. Department of Education pays to administer the loans. FedLoan is one of many federal student loan servicers, including Great Lakes, Navient, and others.
(Technically, FedLoan is actually the Pennsylvania Higher Education Assistance Agency, which is a quasi-governmental organization created by the Pennsylvania General Assembly. But don’t let that confuse you; it is still a separate organization from the Dept. of Ed.)
Loans currently serviced by FedLoan will be transferred to one of the other federal student loan servicing companies.
This has no effect on the federal student loan program. It only changes which company manages your loans.
FREE RESOURCE!
Start your debt-free journey today with the tools and tips in this free Debt Rescue Pack.
Loans serviced by FedLoan will transfer to a new loan servicer
You will be notified by email, letter, or both by FSA (Federal Student Aid) when your loan is transferred to a new servicer. This should not affect the terms, interest rates, or payment plans of your current loan. Learn more at studentaid.gov.
It should just mean that you will eventually make payments to a different loan servicer and log in to a different website.
You should also know that scammers are trying to take advantage of this situation and you may be receiving official-looking information from fake student loan companies. You can verify your new loan servicer by logging in to your account at studentaid.gov.
How to make sure the transfer goes well
Unfortunately, loan servicers, especially FedLoan, are notorious for mismanagement and misinformation. It’s important to keep detailed records of payments and to check to make sure all information is correct.
Before your loan transfers, download or take screenshots of your payment record through the FedLoan website.
Always keep records of correspondence with student loan servicers.
Keep detailed records of payments, including date and amount.
After your loan transfers, make sure all of the information is correct. Verify that you are still on the same payment plan and that all payments are recorded.
If you are participating in a loan forgiveness program, such as PSLF, also maintain records of employment and which payments were made while you worked at the qualifying job.
Check your credit report periodically to make sure no incorrect information was reported.
What to do if something goes wrong
Start by contacting your loan servicer. If you don’t get anywhere, ask to speak to someone higher up. Click here for more tips on resolving disputes with your loan servicer.
If your loan servicer doesn’t resolve the problem, you can file a complaint with the ombudsman.
As a last resort, you can also file a complaint with the Consumer Financial Protection Bureau.
How to learn more
The best thing you can do is educate yourself about student loans by using the resources and tools on the Federal Student Aid website. Not only will this help you make sure you’re managing your loans in the best way for you, but it will also help if you need to dispute anything. Student loan servicers are not easy to work with and many people report being told wrong information. The more you know, the better you’ll be able to communicate with loan servicers and get exactly what you need.
Please consider sharing this article with others who might need help understanding this big student loan change.
