UPDATED – August 17, 2020
The infamous FedLoan Servicing, an arm of Pennsylvania Higher Education Assistance Agency (PHEAA), might be getting fired in mid-December 2021. The servicer changes were originally thought to be implemented in December 2020, but now the Department of Education says otherwise.
“Even though we awarded the contracts, these companies won’t start doing this work immediately. We’ve got to first put the tools, technology, and training in place to ensure that you get the right answer with every interaction.
To make sure there’s no interruption with your current loan servicer, we’ve made it possible to extend the servicing work for FedLoan Servicing (PHEAA), Great Lakes, Navient, and Nelnet through December 2021 and for CornerStone, Granite State – GSMR, HESC/Edfinancial, MOHELA, and OSLA Servicing through March 2022.” – Chief Operating Officer Mark Brown, Federal Student Aid
Regardless, it wouldn’t be surprising to see FedLoan get fired at some point. That’s why you should be ready when and if this happens in the future, so we developed this guide so you won’t have to worry about your PSLF payment count.
FedLoan is responsible for PSLF
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 2017, so from that perspective, PSLF is a relatively new program.
PSLF has had problems
It’s not a secret that the program (and its servicer FedLoan) has had flaws, and 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 may get transferred to whomever 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 you possibly can.
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
It’s unknown at this point who will be responsible for the PSLF program if there’s going to be a change in loan servicers.
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 though 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 main 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.
As your servicer, FedLoan reports all collected payments and loan information for each borrower to this centralized database to date so your saved payment history can be your backup in case 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.
We have been alerted that FedLoan has not been counting the months of CARES Act forbearance so far but have communicated that they will once payments resume again.
Don’t be alarmed by this retroactive approach though; by law these months will count toward forgiveness timelines if you have a Direct Loan, were on a qualifying repayment plan prior to the payment suspension (March 3, 2020), and work full-time for a qualifying employer during the suspension.
Be aware that reviews and appeals may be delayed
One concern I do 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.