FedLoan Servicing Review: And You Thought the DMV Was Bad

When we first thought about writing a FedLoan servicing review based off of our recent survey, we knew it wouldn’t be pretty. But hoo boy, the things we heard from you just confirmed it: FedLoan servicing, even though it manages roughly a quarter of student loan debt, is without a doubt one of the worst loan servicers you could be assigned to.

There might not be any good way around working with FedLoan, especially if you’re trying to achieve the coveted Public Service Loan Forgiveness (PSLF). However, Federal student loan forgiveness doesn’t mean you can just silently make whatever payments they tell you to make and hope they’ll eventually go away and everything will be peachy.

Life’s not that simple, especially when complicated finances are involved. Unfortunately, FedLoan servicing is definitely one of those companies that can eat away at your finances for years like dry rot, leaving you on the hook for thousands more than you expected.

We’ll tell you what to expect when working with the company to pay off your federal student loans in this review of FedLoan servicing. We’ll also tell you what you can do if you run into problems so that you can pay off your student loan interest rates at a pace that’s right for you. That way, you can be finished with student loans — and your FedLoan payment — for good.

FedLoan Servicing Survey Results Say…

In the summer of 2018, we sent out a survey to Student Loan Planner readers and asked them a few simple questions: if you have federal student loans, who is your servicer, and how has it been working with them?

We got back hundreds of responses, and far and away, FedLoan is the servicer who most readers have been assigned to. A full 46% of respondents are currently working with FedLoan to repay their federal student loans.

FedLoan isn’t quite the worst student loan servicer among borrowers however. Only one student loan servicer — Navient — was rated as worse than FedLoan. FedLoan was rated 2.8 out of 5 stars by respondents — beating out Navient, which was rated as a 2.7, by a hair. We’ll chalk that one up to the survey methodology though and say that both companies are equally terrible since that’s probably within the margin of error anyways.

Furthermore, it seems like it’s a bit of a tough task to work with FedLoan. That’s because 94% of FedLoan borrowers have had to contact the company at some point about their student loans.

We were curious about how well the company is able to resolve problems as well. As it turns out, 31% of FedLoan borrowers’ issues were “not resolved,” 35% of FedLoan borrowers’ issues were only “somewhat resolved,” and 33% of FedLoan borrowers’ problems were “satisfactorily resolved.”

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So, it’s a pretty even split between whether they will, will not, or will only partially fix your student loan problems. Imagine if any other business were like that — say, for example, your bank.

Would you be satisfied if you only had a one-in-three chance of having your bank be able to fix problems with your account?

FedLoan Servicing’s Legal Problems

To prepare you for what’s about to come in the rest of the review, we should prep you by saying that FedLoan currently has some legal problems. Surprise, I know. In 2017, the Massachusetts attorney general filed suit against FedLoan, alleging borrower abuse with things like:

• Not counting eligible payments towards PSLF
• Overcharging borrowers
• Putting some loans into automatic forbearance (this allows interest to accrue, and means it’ll take longer to qualify for PSLF)
• Wrongly converting TEACH grants into loans, saddling borrowers with tons of debt when they’d made life-altering career decisions in order to get these grants

As you read through people’s complaints about working with FedLoan, you’ll see that these issues — and others — are common among borrowers.

Here are other things we heard from FedLoan borrowers in our survey, and what you can do to counteract them:

Keep Backup Records of Everything

There’s a pretty decent chance that FedLoan will lose your records and forms at some point, just like Christina S.:

I am very concerned about FedLoan’s record keeping. I am planning to apply for PSLF in a few years. Just this year, everything they had in my inbox prior to 2017 disappeared. Luckily I keep good records, but I’m concerned about the records on their end when I send my application in.” — Christina S.

Christina is smart since she’s already prepared backups and may need to use them. But it brings up a good point: keep records of everything. Forms you submit, phone calls with the date, time, and person you’re speaking with, etc… Even website screenshots showing that FedLoan has received or accepted your forms couldn’t hurt.

For a truly horrifying story of what can happen when FedLoan loses your paperwork, see how FedLoan cheated Travis himself out of the equivalent of $20,000 due to missing paperwork towards PSLF.

Expect Anything to Take a Loooooooooooooooooong Time

I’ve worked in government for nearly 20 years, and we are not even this slow,” says one anonymous respondent. “I can get a driver’s license in two weeks, but it takes these people months to confirm my employment is legit. They are in over their heads.”

This delay wouldn’t be quite as frustrating if FedLoan’s own slowness prevents you from completing filing requirements. Believe it or not, that has actually happened:

Every time I sent my pay stubs in via mail ([there was] no online uploading option at that time), FedLoan servicing company would take more than six months to process,”

says one anonymous respondent.

That’s inconvenient on its own, but it had real consequences for this person:

After waiting around for six months, they [would] tell me the pay stubs are not current, and that I need to resubmit paystubs for them to calculate how much I need to pay back. This delayed my process of starting to pay back by IBR, and to qualify for PSLF, by at least one year.”

Thankfully things should progress faster online, but again — it’s just another reason why it’s probably a good idea to check back frequently so that your paperwork doesn’t expire while it’s sitting in an infinite pile on someone’s desk.

Different Loan Reps May Tell You Different Things

Here’s one of the real kickers. It’s one we hear often, and from borrowers working with almost all federal loan servicers: oftentimes, you can’t even trust the advice that the FedLoan representatives themselves give.

Loan reps are people too. Oftentimes they’re nice, but sometimes they’re not, like with this case:

The customer service member repeatedly asked me if I have considered selling any of my organs to help pay for the student loans debt I could no longer afford. While I assume this was a joke, it’s not only illegal but it did absolutely nothing to help me at a time when I was seeking help paying back my grad school loans.”

— Kimberly P.

Because FedLoan’s loan reps can give out bad information, we recommend trying out the “two-call test” for any questions or problems you have. Try calling up two different times — spaced apart a bit, so you get different loan reps — and see if they answer your question in the same way.

If so, chances are it’s correct. If not, something’s amiss. In this case, the FedLoan ombudsman would be the best person to contact to resolve your issue (we’ll list out their contact details in the last section).

It sucks, but it’s true: when working with any federal loan servicer, the onus is often on you, not the company, to get the correct information.

FedLoan Servicing Might Put Your Loans Into Forbearance While They Figure Out Their Own Problems

[They] incorrectly calculated my monthly payment amount when I recertified,” says another anonymous respondent, “then forced me to go on forbearance and miss opportunities to make PSLF-qualifying payments while they dragged their feet recalculating.”

So, even though it might be no fault of your own, FedLoan may put the brakes on your repayment plan if they see they’ve made a mistake. And because they’re so slow (see previous section), this can probably take quite some time.

Each month that you’re on forbearance, that’s even more interest charges piling up, and precious payments that you’re missing until you reach the magic number of 120 payments for PSLF. This is, in fact, one of the same allegations in the Massachusetts lawsuit against FedLoan.

Why Working With FedLoan Servicing Is So Important

We’ve painted a pretty dire picture of FedLoan. It’s a reputation well deserved, based on talking with student loan borrowers like you. So, you might wonder why anyone would stick with them?

Well, first off, you don’t really get a choice in federal loan servicers except in certain situations. So, many people will simply be assigned (and therefore stuck) with FedLoan.

The second — and perhaps biggest reason — is because FedLoan is the only federal loan servicer who will certify your years of making student loan payments in order to qualify for PSLF.

Once you submit your first PSLF certification form (these should be handed in annually, or at least when you change jobs), you will automatically be transferred over to PSLF regardless of who your original federal student loan servicer was.

Of course, you can stick with your original loan servicer and cross your fingers that you’ve done everything correctly and apply for PSLF at the end. But by that point you’re looking at masses of paperwork, often requiring information that no one knows anymore and signatures from people who no longer work where you did 10 years ago.

It’s a gamble, and even with all of their shortcomings, it’s way better to stick with FedLoan and submit your certification form annually if you’re trying to get PSLF.

FedLoan Servicing FAQs

Can I get a lower interest rate from FedLoan?
Unfortunately, no. The interest rate on federal student loans is fixed, and it was set during the semester in which you took out your loans. There’s no way to adjust the interest rate without refinancing with a private lender, but that carries other risks on its own.

Can I change federal student loan servicers?
You can only change federal student loan servicers in two cases.

First, you can submit an annual certification letter for PSLF service, which will automatically trigger your loans being moved to FedLoan. But since that’s the subject of this review and why you’re here, you probably want to go the opposite way…

Second, you can consolidate your federal student loans into one loan. If you do this, you do get a choice of different federal student loan servicers.

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What is FedLoan forbearance?
This isn’t a special program unique to FedLoan. If you qualify for taking a break from your student loan payment, all federal student loan servicers are obliged to let you take forbearance.

During student loan forbearance, you can temporarily stop making payments. There’s a cost to this, however. While you’re not making payments, interest will continue to accrue and be added (capitalized) onto your student loans. When you start making payments again, your total balance will be larger than before.

Do I have to use FedLoan for PSLF?
No, you don’t.

But most people who are trying to achieve PSLF do work with FedLoan, and for one very good reason: they’re the only federal student loan servicer who will accept and verify your annual certification forms.

Otherwise, you’ll have to track down your old bosses 10 years later, and that may no longer be possible. Better to be safe and stick with FedLoan.

Is FedLoan a for-profit company?
Yes. FedLoan is one of three for-profit federal student loan servicers. Nelnet and Navient are the other two for-profit federal student loan servicers.

What Can You Do If You’re Not Happy Working with FedLoan?

Unfortunately, if you’re not happy with FedLoan, it’s not quite so simple as just taking your business elsewhere like you (rightly) would with any other company. You were assigned to FedLoan and stay with them you must, unless you really aren’t happy working with them and are prepared to sacrifice a bit and/or pull some strings.

Here’s what you can do.

Pay Off Your FedLoan Student Loans As Fast As Possible

Easier said than done, right? We know.

But if you’re earning a high income and you can afford to cut back in some places, that will free up extra money that you can use to pay off your student loans early. Even if you’re not earning a high income, you might also be able to earn more money to pay off debt with a side hustle like virtual assistant work, tutoring, or freelance writing.

The benefit of this method is that you’ll not only be done with FedLoan, but you’ll also be that much closer to being debt-free overall. It’s just icing on the cake.

Consolidate Your Federal Student Loans

You don’t get a choice for who services your federal student loans if you’re already stuck with FedLoan…unless you consolidate your loans. This entails wrapping all of your federal student loans (not private student loans) together into one loan, with one interest rate.

A handy side perk of going through this process? You get to choose your federal student loan servicer. If you want to work with a “good” loan servicer like Great Lakes, you can do it.

This option is best for people who meet three criteria:

• You aren’t looking to get PSLF
• You want to keep your federal student loan protections and features (like income-driven repayment plans)
• You haven’t already consolidated your federal student loans

Refinance With a Private Student Loan Servicer

This is one to approach with caution, but it can work.

If you turn your federal student loans into private student loans, you’ll likely receive a much better quality of service since you’re working with a company that is actively competing for your business.

Unfortunately, when you do this, you lose out on all the nice protections that come along with federal student loans. That’s why you need to carefully consider whether you might need these protections (like the option to take forbearance, income-driven repayment plans, or PSLF) in the future.

Contact the FedLoan Servicing Ombudsman

This office is designed to be the go-to for problems with FedLoan. It’s a bit like taking a shortcut to the manager’s manager. This is also a useful office to contact if you’re getting conflicting information from different loan reps.

It’s always a good idea to remain as friendly and informative as possible. If you just send the ombudsman a brief “FEDLOAN SUX” email one-liner, they probably cannot or will not help you.

Here’s the FedLoan customer service number and mailing address:
Pennsylvania Higher Education Assistance Agency
The Office of Consumer Advocacy
1200 North 7th Street
Harrisburg, PA 17102
FedLoan Phone Number: 1-800-213-9827

Hire Travis For a Student Loan Consult

FedLoan’s job isn’t to care about you and how to best help your student loans fit into your overall financial plan. They’ve made that pretty clear with their actions, if not their words.

Instead, FedLoan, like all other federal student loan servicers, has gotten the contracts to service your federal student loans by providing the lowest number of student loan defaults for the cheapest price to the government.

There’s been a theme running all throughout this FedLoan servicing review that it’s on you to make the best decisions regarding paying off your student loans. But you don’t have to do it alone.

Travis is a student loan expert with tons of experience who can help you run the numbers and hash out what the best options are for your financial situation. It’s quick and easy to book a consult today to get personalized advice.

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We want to hear from you.

What has your experience been in working with FedLoan servicing? Have they been good to you, or have they sucked? Let us know below — looking forward to reading your stories!