- April 27, 2017
- Posted by: Travis
- Category: PSLF, Student loan Servicers
Raise your hand if you’ve been personally victimized by FedLoan Servicing. If you’ve got student loans with them, you’re not going to be too surprised to hear how FedLoan Servicing totally screwed us over.
The pic above with the hundred dollar bills stuffed in the toaster basically summarizes our experience with them. I’ll start with our story of misfortune, and then I’ll give you some details on the problems my clients and friends have had with FedLoan payment and customer service.
FedLoan Servicing SHOULD NOT Be Handling PSLF
Maybe you have an experience of your own to share. Pleeeeeease share it in the comments at the end of the article. I’d love to compare what I’ve been seeing in this business with your experiences.
Frankly it’s freaking outrageous that the government gave them a monopoly on servicing borrowers in the PSLF program. Hopefully this piece and the comments will serve as exhibit A why the government should dump them.
If you’re stuck with FedLoan Servicing, then there’s a high chance you’re going for PSLF. You can enter your email below and get my 40 best tips for this program, including how to deal with FedLoan.
FedLoan Enters the Picture After My Discovery of a Promising Loan Forgiveness Program in 2015
When I met my beautiful girlfriend (now fiancee) Christine, and we started getting more serious, we had the money talk. She let me know that she had six figures of med school debt. Maybe you were the one who delivered the “I have a lot of debt” line instead of being on the listening end like I was. My reaction was basically just, “ok let’s figure out how to save money paying this back.” I viewed it as my debt too, since I was looking to spend the rest of my life with her.
Maybe when you graduated school or found out your partner had student loans, your first thought was the same as mine was. We’d just pay it down super fast and get out of debt, but then I found out about the PSLF program. In that moment, all my Dave Ramsey / Suze Orman conventional wisdom just went straight out the window.
We Thought We’d Found the Solution to Our Six Figure Debt
Christine could finish her training, work for a few more years at a not for profit hospital, and get whatever she had left over wiped away tax free. SOOOO COOL!!!!! I learned that we had to submit this PSLF form to the government, so I helped her fill it out. We mailed it in to this place called FedLoan Servicing, eagerly awaiting the good news that we would save tens of thousands on our debt.
FedLoan Servicing Got Involved and Torpedoed Us
So now the fun stuff, seeing how much money we lost because of them.
If you’re like me, you had no idea that submitting the certification form for the loan forgiveness program would forcibly transfer us to FedLoan. We felt ok with NelNet, our previous servicer. We thought that we would receive an answer directly from the Federal Government. When we opened the letter though, FedLoan Servicing answered us instead.
Quick back story. Christine had consolidated her loans in 2012. She had made payments for three years at that point on Income Based Repayment, so we were expecting to see 36 credits towards the 120 needed for loan forgiveness and go out on the town to celebrate.
Somehow FedLoan Lost Years of Payments, Oopsy Daisy!
Then we open the letter and look at the first page. We flipped through the document that they sent us, and half the loans said about three years of credit, as we expected.
Additionally, we kept flipping through the other pages and our mouths dropped. The other half of her loans only had 1 month of credit towards PSLF.
Of course, we tried to get in touch with them and figure out what happened. By and large, they were completely useless.
We’re pretty sure that FedLoan lost the payment history when the loans transferred over from Nelnet on 50% of her $124,000 in debt. That means the awesome loan forgiveness benefit literally evaporated before our eyes.
How Do I Calculate that $20,000 Cost thanks to FedLoans?
To analyze our debt situation, I built a spreadsheet that’s the flagship tool for Student Loan Planner, the handy free student loan calculator. You can get it for free by clicking on the button below or entering your email at the bottom of the post. Without going too deep in the weeds, our cost under PSLF for the $124,000 we owed would have been about $108,000.
We found a pretty good deal for a 2.2% 5 year variable rate that we figured would cost us about $128,000 since we were going to pay it off in a couple years. Hence, the difference between those two strategies was about $20,000.
Thanks to FedLoan Servicing, we abandoned PSLF. If we had to start over working towards PSLF at 1 month credit on half her loans, we would pay 6.8% interest for 10 years and get no forgiveness. She was almost out of training by the time we figured out that we needed to submit the loan forgiveness forms. Our window of making small monthly payments that would count towards PSLF had left us.
FedLoan Servicing Problems My Clients Are Dealing With
One of the reasons I felt like it was fair to share my opinion about FedLoan servicing is because I know that it’s not an isolated issue. After all, I’ve spoken with hundreds of clients on their student loan strategies. Here’s a sampling of problems the horrible FedLoan customer service is inflicting on them.
Honestly, I am still fighting FedLoan to be consistent in honoring and publishing months paid across all of my loans. I have concern for them trying to scrap my existing credit if I make any waves
I’ve switched my direct loans to FedLoan servicing, but from what I’m seeing, it says I have made 0 qualifying payments. I’ve made 12. What gives?
FedLoan is telling me I have to make a huge payment on the Standard 10 year plan before they’ll let me re-certify for IBR. Can’t I pay $5 on a one month forbearance?
I refinanced some of my loans and asked FedLoan multiple times to only refinance the ones with the highest interest rates. I opened my statement, and they applied it equally to everything, even the ones with lower rates than I was refinancing at.
That Time I Heard a FedLoan Compliment
Remember I’ve spoken with a large number of borrowers who had loans with FedLoan Servicing. I’ve heard positive feedback maybe one time.
The compliment? “The rep was unusually helpful and nice.” Hardly a ringing endorsement.
What FedLoan Servicing Problems Are You Dealing With?
I’ve heard and seen all kinds of horror stories with FedLoan Servicing. Can you one up me with your story? Post it in the comments. Maybe you’ve:
- 1. Had a rep tell you that you were on a payment plan that that you actually weren’t even on (seen this one a lot)
- 2. Called them a dozen times to accomplish a basic loan consolidation correctly
- 3. Been put on forbearance or deferment when you could’ve been on an income driven plan
- 4. Asked the same question multiple times to different reps and gotten a different answer each time
What I’m really looking for is if you can top our story of losing out on $20,000 thanks to the folks at FedLoan? Definitely let’s compare our misery. Remember you can also (and should) submit complaints about your FedLoan customer service with the Student Loan Ombudsman’s office.
The One Thing I Have to Thank FedLoan Servicing For: Pushing Me to Found Student Loan Planner
Our experience with FedLoan was so bad. I thought that there had to be a better way to get expert help on student debt. Moreover, I felt like graduate professionals with the highest debt loads received extremely bad service that cost them a ton of money in unnecessary student loan payments.
So after helping my fiancee analyze her loans, I helped some of our friends, and the student loan calculator I built went viral. That’s why I’m writing to you today. I do flat fee consults to solve student loan confusion over how to save the most money paying them back.
If You’re Not Sure You’re Managing You Loans in the Best Way, We Can Help
If you’re on IBR, ICR, filing taxes separately, have private loans with rates over 8%, not maxing your retirement accounts, or not saving for the tax penalty of private sector loan forgiveness, definitely check out the consult service.
Average client savings have been around $80,000 over the 10-25 year period the loans will be around.
Hopefully one day all the consolidation factories promising “Obama Student Loan Forgiveness” or “Trump Student Loan Forgiveness” will shut down.
Sadly, that day will only come when the Department of Education fires FedLoan Servicing or FedLoan cleans up its act. Look forward to reading your questions and stories below.
If You’re not going for Student Loan Forgiveness, Just Refinance and Dump FedLoan as Your Servicer
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