Written By Meagan McGuire, ChFC®, CSLP®
The infamous FedLoan Servicing, an arm of the Pennsylvania Higher Education Assistance Agency (PHEAA), notified the Department of Education that it no longer wished to service federal student loans beyond the expiration of its contract on December 2021.
On October 4, 2021, The Department of Education announced it would be transferring the customer service of federal student loan accounts from FedLoan Servicing to MOHELA, another member of ED’s federal loan servicer team.
Not to worry, though… We’ve developed this guide so you won’t have to worry about your PSLF payment count with these imminent servicer changes.
Since the program’s enactment in 2007, Fedloan has been responsible for the Public Service Loan Forgiveness (PSLF) program, a student loan forgiveness opportunity for borrowers working full-time in public service.
To be eligible for PSLF, you need to:
- Have Direct Loans
- Be on an income-driven repayment (IDR) plan
- Work full-time for a qualified employer
- Make 120 qualifying payments
The first year we could have ever seen someone achieve loan forgiveness was in 2017, so from that perspective, PSLF is a relatively new program.
PSLF has had problems
Editor's note: Recent changes to prior PSLF payment eligibility could positively impact millions of borrowers. Even though the PSLF Waiver expired October 2022, almost all of the benefits are still available through the IDR Waiver until April 30, 2024, for those currently working in qualifying not-for-profit or government jobs.
It’s not a secret that the program (and its servicer FedLoan) has had flaws. The Department of Education has set its sights on improving customer service and holding servicers more accountable for their performance in managing federal student loans.
Education Secretary Betsy DeVos believes this goal starts with firing the old major servicers and replacing them.
Your student loans aren’t being sold — Fedloan’s servicing contract with the Department of Education may just be expiring; therefore, your loans will be transferred to MOHELA, who will be deemed responsible for PSLF going forward.
Special considerations for those pursuing PSLF if Fedloan is fired
When your student loan servicer changes, there’s an unavoidable disruption to your payment routine. With a program as sensitive as PSLF, you want to minimize that disruption as much as possible.
A borrower’s PSLF payment count dictates their forgiveness timeline — once you make 120 qualifying monthly payments, your remaining student loan balance is forgiven, tax-free.
Download your payment history
Before the servicing work extension expires, save a PDF or take pictures on your phone of your payment history to date (and save to the cloud). Don’t stress too much about this proof because your National Student Loan Data System record will not be affected by a servicer change.
The NSLDS database, found at StudentAid.gov, is the Department of Ed’s primary record for student aid and provides a centralized, integrated view of your loan data that is tracked through the entire loan lifecycle, from aid approval through disbursement and repayment.
FedLoan reports all collected payments and loan information for each borrower to this centralized database to date as your servicer. Your saved payment history can be your backup if there is ever any discrepancy somehow.
Submit a new Employer Certification Form by the servicing extension expiration
Your NSLDS file updates in real-time as your FedLoan reports your payments, but your PSLF payment count does not get updated until you submit a new Employer Certification Form.
The ECF is retroactive, so FedLoan will determine how many qualifying payments you made during the period of qualifying employment within the dates provided in Section 3 of this form.
To be safe, go ahead and submit a new ECF form before the servicing work extension expires to get your PSLF payments counted to date before any possible student loan servicer change at the end of the year.
Be aware that reviews and appeals may be delayed
One concern I have is if your PSLF payment history is under review for whatever reason by FedLoan. FedLoan may not end up getting around to it if they’re being replaced. We’ll be watching out for information on how these reviews, the TEPSLF program, and FSA Ombudsman Group appeals may be affected by these student loan servicer changes.
Make sure you have a solid plan
The biggest inhibitor of successfully qualifying for loan forgiveness that I see is not doing your due diligence on your loan situation. If you have the right loan plan in place, you’re already a step ahead. If you’re not sure that you’re on track for PSLF, I encourage you to get a plan in place now.
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Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
In addition to taking a screen shot of your payment history, be sure to download and save to the cloud, a copy of all correspondence in your account with FedLoan (or any other other servicers for that matter.) When loans transfer from one servicer to another, all the documents are supposed to transfer with the account. They DON’T. At least not things that you may be asked for later for PSLF “proof”. And information such as if you are on an IDR payment plan, especially for older payments when the PSLF wasn’t fully in place, don’t show up on the National Student Loan Data System Record. An example of the documents in your account becoming an issue on transfer (my personal experience). I transferred my loans to FLS from Navient a few years ago when the PSLF program looked in jeopardy. I can still log into my Navient account and see the payment history, but there are no documents there any longer. Navient said upon transfer to FLS all documents accompanied the loan. FLS said they don’t have any documents and what they do have has incorrect coding on the type of payment plan I was on. I have a pretty good paper trail, but I really wish I would have downloaded all those docs from Navient and now they are just in the wind. Good luck everyone – we will need it.
It seems like the payment history to date from FedLoan doesn’t include the $0 payments (due to such a low income) that still count towards forgiveness, so anyone in that situation will have to find another way to track…
I will be starting a federal job in march and want my first payment to go to PSLF. I have already started to switch over to the PAYE plan. Would it be a good idea to consolidate my loans and switch over to fedloans before I start my job? I read that consolidation can take up to 2 months to complete. can you help with this?
Consolidating resets your payment count, so you don’t want to consolidate after you’ve accumulating qualifying payments for PSLF. I suggest you consider our consult service: https://www.studentloanplanner.com/hire-student-loan-help/ to get a plan.