FedLoan Servicing services approximately a quarter of the student loans received by college students every year. Unfortunately, some borrowers haven’t had positive experiences with FedLoan, which is why the company ranked second-worst on Student Loan Planner’s survey of loan servicers. Because of this, people are searching for FedLoan consolidation and refinancing options to avoid dealing with them.
Here’s a look at how to consolidate FedLoan student loans. We also explore FedLoan refinancing options and whether refinancing is a smart choice.
What is FedLoan Servicing?
FedLoan Servicing is one of the federal student loan servicers used by the Department of Education. Federal student loan borrowers who’ve been given FedLoan as their servicer will receive a notification once loan funds are disbursed.
As a loan servicer, FedLoan works with borrowers to collect and track student loan payments.
Loan repayment options available through FedLoan Servicing include:
- Standard Repayment plan: Pay off your student loans over a 10-year period.
- Income-Driven Repayment plans: Choose one of four available options. Monthly loan payments are based on your household income and family size. IDR loans are paid off over 20 to 25 years.
- Graduated Repayment: Start with lower monthly payments that gradually increase over time, for 10 or up to 30 years.
- Extended Fixed Repayment: Make lower payments than a Standard Repayment plan over an extended period up to 25 years.
- Extended Graduated Repayment: Make payments over a maximum of 25 years with payments that gradually increase over time.
FedLoan Servicing also administers the Public Service Loan Forgiveness (PSLF) program.
Why borrowers are running away from FedLoan Servicing
FedLoan Servicing has built a poor reputation as a loan servicer over the years. This notoriety is on full display through the numerous Consumer Financial Protection Bureau complaints against the servicer.
One recent complaint was related to FedLoan’s customer service. The borrower called FedLoan to ask a question. After the initial customer service representative was unable to answer the question, the call was transferred to a loan advisor. The borrower said:
“The hold time was expected to be 20 minutes. I was on hold for 1 hour, 13 minutes, 53 seconds. No one answered (the) phone in that time and my line was DISCONNECTED!”
Several other complaints revolve around receiving misleading information from FedLoan regarding PSLF payments and requirements. Because PSLF has many requirements to qualify, not having correct information could be the difference in getting student loan debt forgiven or not.
In December 2019, Student Loan Planner conducted its Student Loan Refinancing Survey. FedLoan borrowers who responded expressed that they were unhappy with the customer service they received from FedLoan.
One participant complained about horrible service and receiving “misinformation” from the loan servicer. Another respondent said, “FedLoans is awful.” Experiences like these have many federal student loan borrowers looking for alternatives to FedLoan Servicing.
Consolidation options for FedLoan student loan borrowers
In most instances, it’s impossible to switch loan servicers for federal student loans. One way to so do, however, is through student loan consolidation.
A FedLoan consolidation involves combining two or more student loans to create a new Direct Consolidation Loan. If you’re thinking about consolidating your FedLoan student loans, make a note of the following details:
- Your new Direct Consolidation Loan comes with a fixed interest rate based on the average of the rates on the loans you are combining.
- There’s no extra cost to consolidate federal student loans.
- Private student loans aren’t eligible for consolidation through Direct Loan Consolidation.
- Consolidating several student loans into one leaves you with only one monthly student loan payment to worry about.
When you apply for a Direct Consolidation Loan, you’ll reach a step that allows you to choose a new loan servicer from a dropdown list on the website. If you’re unhappy with FedLoan Servicing, this is your chance to move to another loan servicer.
Be careful what you wish for, though. You may run into similar issues with a new loan servicer. Do your homework and research loan servicers before choosing a new one. Check out our rankings of federal loan servicers to learn more about each one.
Refinancing options for FedLoan student loans
FedLoan doesn’t offer options to refinance student loans. Even if it did, you may still want to look elsewhere to avoid having FedLoan service your loans.
Refinancing is an opportunity to possibly lower your loan interest rate, knocking thousands of dollars off your debt over the life of the loans. FedLoan refinancing would combine your federal student loans into one private student loan held by another lender. This new loan would also come with a new interest rate — hopefully, a lower rate — and new loan terms.
Refinancing your FedLoan student loans through one of our private lending partners could earn you a cash bonus, too.
Before making a final decision, check with several lenders to find the best rate possible. Credit is the biggest factor that private lenders look at when refinancing. It often determines approval and the rate you receive.
Refinancing has many financial benefits, but it also cuts off access to federal protections you might need at some point, including:
- Student loan forgiveness programs
- Forbearance and deferment options
- Income-driven repayment plans
Keep these factors in mind when deciding whether refinancing your FedLoan student loans is right for you. We recommend exploring refinancing if you:
- Work in the private sector
- Aren’t pursuing loan forgiveness
- Have a decent emergency fund built up
- Owe more than 1.5 times your income
If this describes you, it’s a good idea to look into the interest rates you qualify for.
When to stay with FedLoan Servicing
Almost any chance to move away from FedLoan Servicing may be worth it, but there’s one group of people who shouldn’t. If you are pursuing or planning to pursue PSLF, you should stay with FedLoan Servicing. It’s the official loan servicer of the PSLF Program, which means that you don’t have a choice if you want your loans forgiven through PSLF. The servicer is your only option, unfortunately.
If you qualify for PSLF, though, and have a chance to get the majority of your student loan debt forgiven tax-free, enduring your frustration with FedLoan Servicing will be worth it.
Get help creating a strategic student loan plan
Dealing with a poor loan servicer is frustrating. If you aren’t sure what to do, we can help. Book a call with one of our student loan planners. They can work with you to create a customized repayment plan for your student loan debt. Having a clear plan takes away a lot of the anxiety that comes with student loan payments.