FedLoan Servicing Stinks. Here’s Why You Still Need Them in Your Life

I get a complaint about FedLoan Servicing problems and their customer service almost every day since I wrote about my wife’s experience losing thousands of dollars. Sometimes, readers and clients tell me that they want to keep their loans at other places until the very last minute. Then they’ll transfer everything over for Public Service Loan Forgiveness.

Here’s the unfortunate truth: you want FedLoan in your life sooner rather than later if you’re pursuing loan forgiveness on the PSLF program. We’ll show you when, why, and how to deal with FedLoan so you can maximize your chances at benefitting from PSLF.

Get Tracked On FedLoan’s System ASAP

Imagine this scenario for a moment. You know you could get PSLF, but you decide that you’d rather deal with Nelnet or Great Lakes because they’ve been pretty fair to you. Your plan is to stick with them until you’re eligible for PSLF after completing your 10 years of service.

Then you’re going to turn in your docs and apply with FedLoan for this benefit. What could go wrong?

A lot.

None of the other loan servicers will track your progress to PSLF at all because it’s not in their mandate. That means the burden will be on you after 10 years of payments to prove that you were employed at the right kind of job while making the right kind of payments.

The current employer certification form (ECF) that FedLoan gives out looks a lot like their application for the actual PSLF benefit.

That means if you keep your loans at another servicer for the period, you’ll be required to show proof that you did everything right during these 10 years. Imagine tracking down a residency program director or calling an HR dept that had your records a decade ago to get them to sign a form.

When To Send In the Employer Certification Form (ECF) for PSLF

By not moving your loans over to FedLoan for tracking, you risk getting your benefit on time. To me, that’s not worth the better customer service that you might receive at other servicing companies.

Hence, you’ll want to submit the certification form above as soon as you can if you intend to benefit from PSLF. If you’re a new grad, this might be a couple months after you consolidate. If you’ve already made years of payments, you’d want to send in the form as soon as possible.

That ECF moves your loans to FedLoan and also will get your loans tracked for the PSLF benefit. You’ll want to resubmit it at least annually.

FedLoan has an online option for submitting this form that I highly recommend over the snail mail choice.

FedLoan Has a Poor Track Record of Communicating with Other Servicers

It would be hilarious if it wasn’t so sad, but I’ve seen countless breakdowns in communication between other loan servicers and FedLoan.

Federal law requires that if both borrowers are married, then their entire income and debt should be taken into account for the monthly payments. In other words, if I owe $200,000 and my wife owes $100,000 and our joint income is $90,000, perhaps our payments are about $500 a month.

That payment should be distributed proportionately between our debt based on its relative size. That means my hypothetical 200k should receive about $330 a month in payments and my wife’s should get $170 a month in payments.

What have I seen FedLoan do?

In cases where one spouse has their loans with another servicer, they’ll double charge you even though the borrower tried to tell FedLoan their spouse also had debt.

When they make so many mistakes, you want to make their job as easy as possible (infuriating I know).

By putting both you and your spouse’s loans at FedLoan, you ensure that the payment calculations that they’re supposed to be able to do actually happen.

Imagine losing out on interest subsidies on REPAYE or qualifying PSLF payments just because you wanted an easier phone rep to deal with over at Great Lakes. Not worth it.

Make everything crystal clear for FedLoan as their incompetence is strongly believed by many including me.

Try to Think About the Per Hour Pay When Dealing with FedLoan

Psychologically, it can take a toll dealing with a perennially time-sucking organization that sometimes requires three and four calls to get something right.

View FedLoan as an unfortunate obstacle in your path for getting this awesome Public Service Loan Forgiveness benefit that still exists. Imagine how difficult life would be without it, and then you’re able to take the “glass half full” view when dealing with them.

Pretend you lose five hours a year from dealing with FedLoan and having to correct their payment count, fix their mistakes, and deal with the paperwork they mess up.

How much is your projected PSLF benefit? Many people are in line to get more than $100,000 forgiven.

If you convert that benefit into a yearly amount, you could think of it as a phantom tax-free bonus.

Imagine your employer told you that you could get a $10,000 per year tax-free bonus but had to deal with some unpleasant administrative tasks to get it. You’d totally do it!

I say that mostly to suggest that rather than get upset, j ly get them back in a timely fashion. Who knows?

If this was me, I would ask for a time frame estimate from FedLoan and then call back every month or so to see if there was an update. This should remind them that you’re paying attention while not taking up too much of your time.

That, in a nutshell, is how I suggest dealing with FedLoan. If the person on the phone doesn’t sound competent, request a supervisor, turn your phone on speaker, do something else, and wait.

I have another rule I call the “check twice” trick. While some folks that work there are good and helpful, many have absolutely no business working there.

When you call, there’s no way to know what rep you’re going to get. If they tell you something that sounds odd or isn’t super helpful, call back and ask the same questions of someone else.

When calling FedLoan for information, don’t be afraid to call twice to see if the answers you get match each other.

Minimizing Your Need to Deal With FedLoan Servicing

The only compelling reason to keep your loans with FedLoan is if you’re going for the PSLF program or you need to go for long-term loan forgiveness over 20-25 years with PAYE or REPAYE.

If you plan to pay back your loans eventually, then refinance with a private bank and you’ll get much better customer service. Do so through these links and you’ll get a cash back bonus too.

If you’ve got more than $100,000 in student debt, I would suggest not relying on FedLoan for any ideas on how to save more with PSLF.

We specialize in making a plan for borrowers who hate dealing with FedLoan servicing and want an independent expert to review your situation and 1) make sure PSLF is right for you 2) help you maximize it and 3) save you time dealing with them with tips and tricks we’ve learned in how they work.

You can learn about how we’ve single-handedly rescued the sanity of hundreds of people stuck with FedLoan here.

Take action and move your loans to FedLoan if you’re going for PSLF. Make everything easy for them to avoid FedLoan servicing problems. When you know what to ask for, they don’t have to be such a bane of your existence.

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