Yesterday, one of the US Department of Education’s primary student loan service providers announced it would exit the federal student loan service business by the end of the year, shaking the industry.
The Pennsylvania Higher Education Support Authority (PHEAA), a division of the Department of Education more commonly known as FedLoan Servicing, suddenly announced that it plans to end its federal student loan service when its extended contract expires in December this year. The company will not seek further extension or renewal of its contract.
The sensational announcement of FedLoan Servicing will have a significant impact on student loan borrowers. 8.5 million student loan borrowers’ accounts will need to be transferred to various student loan service companies. These transfers can harm borrowers. Consumer Financial Protection Bureau celebrated in 2015after the last major overhaul by the Service Department that “payments could be lost when service personnel changed, consumers could unexpectedly incur late fees, and processing problems and missing accounts could confuse borrowers with paying off their loans.”
Additionally, FedLoan Servicing’s exit from the federal student loan system will be particularly problematic for student loan borrowers due to its unique role in key federal student assistance programs, including the Public Service Loan Forgiveness (PSLF) and TEACH Grant Program. FedLoan Servicing was the only primary student loan service administering these programs. And it wasn’t very good – FedLoan was widely criticized for mismanaging these programs, and is accused of low approval rates and erroneous rejections.
And FedLoan Servicing may not be the only student loan service that is saving the industry. Some of the Ministry of Education’s other student loan services also operate with short-term contract renewals, otherwise their contracts will expire within the next year.
Given the historically complex student loan service transfer process combined with constant criticism Because of the ability of student loan servants to manage key federal student loan programs, student loan borrowers may rightly be concerned about the future of their accounts. Here’s what student loan borrowers can do right now to protect themselves and hopefully reduce the likelihood of harmful disruptions.
Print or Download All Student Loan Payment Records
One of the most significant challenges faced by student loan borrowers caught in the federal aid system is the lack of consistent record keeping, especially since the transition to the new student loan service. As a result, it can be difficult for borrowers to prove that they paid off their student loans on time during periods of time when the current support staff does not have data to support this. This is especially true for borrowers in specific student loan programs, such as the Public Service Loan Forgiveness (PSLF) or income-driven repayment plan, when time spent paying off student loans on time while participating in these programs is critical to obtaining ultimately forgiving student loans. It is important to note that banks typically only keep records for seven years, which means that borrowers cannot simply rely on their banking institution for records of future payments.
Most student loan service websites allow borrowers to print or download their payment histories. FedLoan Servicing certainly works, and you can even download it as an Excel spreadsheet. Download and save these recordings now and move forward consistently, and put them somewhere safe in case you need them in the future.
Keep copies of all student loan correspondence
Student loan correspondence can be critical in the future, even if you don’t think so now. Borrowers participating in long-term student loan repayment and forgiveness programs, such as income-driven repayment plans and public service loan forgiveness (PSLF), require payments to be made on time according to specific plans for 10, 20, or 25 years. If your past involvement with these plans is ever questioned and your future student loan servitor has no record of it, you may have to prove it. This may require records and correspondence that specifically mentions your enrollment – for example, a letter approving you for an income-based repayment plan, or notifying you of a new income-based payment after your annual recertification. Student loan companies don’t keep correspondence forever, and that correspondence is unlikely to be transferred from your account to a new loan service agent.
This cannot be overemphasized: keep copies of all correspondence. If you want to be extra careful, keep a paper record and upload digital copies of your correspondence to a secure cloud service.
Government Service Loan Forgiveness: Confirming Your Employment And Escalating Disputes
Student loan borrowers participating in the Public Service Loan Forgiveness (PSLF) program may be well aware of the challenges associated with changes in student loan service. Thousands of PSLF borrowers are still struggling to ensure that payments made many years ago count as eligible PSLF payments because their payment records may have been lost, compromised, or mis-transferred from their previous provider.
PSLF Student Loan Borrowers whose student loans are already serviced by FedLoan Servicing can submit their Employment certification to prove your employment and receive an updated number of eligible PSLF payments made prior to the certification date. You can do this by December when the FedLoan contract expires. If you have not yet applied for a work certificate, you will need to fill out a separate form for each of your current and previous public service employers.
For student loan borrowers who are hoping to get forgiven for their student loans through the PSLF program, but whose loans are not yet serviced by FedLoan Servicing, it is a little more difficult. Filing a PSLF Employment Certificate will usually result in the student loan account being transferred from the borrower’s current lending institution to FedLoan Servicing. Whether this makes sense now or not is a personal decision as the borrower may consider multiple transfers for service — first to FedLoan Servicing and then back to the new service provider. Some borrowers whose student loans are not yet covered by FedLoan Servicing may choose to wait until more information is available on which service centers will accept invoices from FedLoan Servicing.
Student loan borrowers who are involved in ongoing disputes with FedLoan Servicing over insufficient invoicing of the appropriate PSLF payments may want to exacerbate these disputes. Some borrowers have been in disputes for months or even years with no foreseeable resolution, and FedLoan probably has little incentive to resolve these disputes before ditching the federal student loan system. Borrowers may wish to refer their disputes directly to the US Department of Education through the Federal Student Service. Feedback system or Ombudsman office.
Monitoring payments and automatic debits
The Consumer Financial Protection Bureau found in its 2015 report that “payments can be lost when service personnel change, consumers can unexpectedly face late fees, and processing problems and missing accounts can lead borrowers astray to pay off their loans.” To be on the safe side, student loan borrowers should monitor their online student loan accounts on a monthly basis. If you have set up automatic payments to be made using the automatic debit program, this probably will not carry over to your new credit provider. This means that you will need to set up a new automatic payment system with a new operator to service the loan after the transfer.
Also keep in mind that we do not know exactly when the student loan service transfer will occur in relation to the end of the current national pause in student loan payments under the CARES Act. This moratorium currently expires on September 30, 2021, but it can be expanded further…
Keep track of your credit report
Student loan service transfers can sometimes cause erroneous negative credit reports, such as missing payments during the transfer process. This can cause long-term credit damage if not detected and resolved early.
During this time, it is critical to keep an eye on your credit report and review it regularly. Under the Fair Credit Reporting Act (FCRA), consumers have the legal right to formally challenge erroneous negative credit reporting and request its removal. If the error persists, consumers can seek help, including in a lawsuit.
While consumers are eligible to receive one free credit report annually from each of the three major national credit bureaus under the FCRA, AnnualCreditReport.com – FCRA’s main free annual credit reporting portal – Offers free weekly credit reports during the Covid-19 pandemic.
Keep your contact information up to date with Student Loan Support
Your contact information will be shared with the new Student Loan Service Specialist along with your student loan account information. This new Student Loan Service Specialist will then contact you using this contact information. Make sure your mailing address, email address, and phone number are up to date and up to date so that you receive proper notice.
Confirm new student loan employee after transfer
There are many scammers and predatory companies out there looking to take advantage of student loan borrowers, especially in times of turmoil. Some of these companies pretend to be acting on behalf of the US Department of Education, which is particularly troublesome. There is no doubt that these operations will rise to a high level in the next few months.
To make sure your new student loan service organization is legal, you can log into the Department of Education’s system. federal student aid websitewhich will tell you who your current Student Loan Service Specialist is and their contact information.