It is important for any economy to have people from diverse walks of life and making varied career options. Selfless yet comparatively low paying jobs like firefighting, teaching, government jobs, nursing, jobs in the military, etc are very important yet people realize that often the ratio of money spent on getting the required education to the money earned later is very high. To bridge this gap, a federal program called Public Service Loan Forgiveness has been designed to encourage students to seek careers in these relatively low paying sectors.
One of the nine companies that service federal student loans by collecting and keeping a track of your student loan repayments is FedLoan Servicing. It is the only student loan servicer that manages Public Service Loan Forgiveness applications. The Pennsylvania Higher Education Assistance Agency, or PHEAA operates FedLoan. It is a nonprofit that also deals with financial aid and state grant programs.
News about lawsuits against the PSLF program have been making headlines in the recent past. Quite a number of borrowers were incorrectly deemed eligible for the PSLF program recently. People who are depending on the PSLF program to make lasting career and financial choices should follow relevant news and stay informed about the program and the servicer at all times.
Most government or 501c3 employees qualify for the PSLF program. We will learn more about how FedLoan deals with PSLF and what the general public opinion is about their servicing.
TABLE OF CONTENTS
- What does FedLoan do?
- How to apply for Public Service Loan Forgiveness?
- Why is the Department of Education being sued over PSLF?
- How this PSLF error could have happened
- An instance of the FedLoan disaster
- How to protect yourself against PSLF mishaps?
- Why the PSLF lawsuit is not a cause for worry
- Alternatives to PSLF
- Customer Reviews for FedLoan Servicing
- In Conclusion..
What does FedLoan do?
As already mentioned, FedLoan is a prominent federal student loan servicer and the only one that deals with the Public Service Loan Forgiveness program. The following are some of its most important functionalities:
It can help you register for online access to your account. You can contact FedLoan to access your monthly billing statements and make repayments.
Can enroll you for autopay. Automatic deductions will be made from your bank account as repayment on your student loan by FedLoan. This also can reduce your interest by 0.25%.
FedLoan can sign you up for income-driven repayment. A percentage of your income will be taken as monthly repayment. Your income has to be validated every year.
FedLoan does processing of deferment and forbearance requests. You can temporarily stop making payments or reduce your payment amount with FedLoan’s help if you qualify. This can help you avoid default. Remember that despite the pause on your repayments, interest can continue to accrue.
FedLoan can process your monthly payments and help you with any extra payments. They will collect and keep a track of your payments. To make any additional payments, you will have to contact and instruct FedLoan to direct payments towards your current balance. Otherwise, it will be considered as next month’s quota.
They process applications for Public Service Loan Forgiveness. It is the only federal loan servicer that manages Public Service Loan Forgiveness applications. They also process your employment certification forms. Your forms will have to be submitted on an annual basis. You may apply for forgiveness after 120 qualifying payments while working.
How to apply for Public Service Loan Forgiveness?
Either have the right loans or consolidate
The only eligible loans for PSLF are those that are part of the federal Direct Loan Program Private student loans are not eligible.
But any progress that you have made so far toward forgiveness will be erased on consolidation.
Other federal student loans, such as Federal Family Education Loan loans or Perkins loans can be consolidated to make them PSLF-eligible.
Work for a qualifying employer
The type of work that you do and who your employer is are important factors taken into consideration to decide your eligibility.
The following are qualifying employers:
Any level of government organizations
AmeriCorps or the Peace Corps.
Any nonprofit organization with a public service as their primary purpose.
An employment certification form that confirms your employer’s qualifications will have to be filled and sent to FedLoan Servicing.
A new form has to be submitted annually, or anytime you change jobs. Once you are eligible, you can apply for forgiveness. Then you can certify your employment.
At least 30 hours of work per week has to be done for a qualifying employer. You may even work part time for two qualifying employers. The time has to average to 30 hours per week.
Switch to income-driven repayment
Either the standard 10-year plan or any one of the four income-driven repayment plans will have to be adopted for your repayments to qualify for PSLF.
Under the Temporary Expanded Public Service Loan Forgiveness program rolled out by the Trump administration, payments made with graduated or extended federal repayment plans may still qualify.
Make 120 payments
120 monthly loan payments, worth 10 years’ time will have to be made. These payments must be:
For the entire amount that is due
Within 15 days of your due date
On or after Oct. 1, 2007
On a qualifying repayment plan when you are working for a qualifying employer
Bear in mind that extra payments don’t count. Payments made while in school, in deferment or forbearance, during a grace period also do not count. This also applies for repayments mads while your student loans are delinquent or default.
It is not a necessity for the payments to be consecutive. You have the liberty to take pauses in between qualifying repayments.
You may switch jobs, but only payments made while working for a qualifying employer count towards PSLF.
Apply for forgiveness
After completing the above steps, you may submit the Public Service Loan Forgiveness application. With your application, you are required to submit an employment certification form as mentioned. You will receive notifications from FedLoan Servicing when they receive your paperwork. Loan repayments are not required while they process your application.
Why is the Department of Education being sued over PSLF?
The main reason why people have been suing the Department of Education is that a lot of people were incorrectly deemed to be eligible for PSLF and that they were on track to get student loan forgiveness. The only company dealing with PSLF is FedLoan Servicing. Borrowers’ loans get transferred to FedLoan when they seek PSLF.
Borrowers from several associations such as the American Bar Association, Vietnam Veterans of America, and other organizations were wrongly told that they qualify. Documented emails exchanged between FedLoan and the Department of Education show that a lot of rules were made without giving proper notice or following standard guidelines.
FedLoan then began to issue rejection letters to borrowers who were previously approved.
Borrowers who faced credit losses decided to then sue.
Who are included in the PSLF Lawsuit?
The affected group consists of people who spent their time in a job thinking they were making progress toward loan forgiveness. A lot of them are lawyers working at the American Bar Association. This group also comprises of people who work for public interest and not for profit like the Vietnam Veterans of America (VVA). These borrowers argue that the Department of Education should restore the time they lost as a result of the Fed Loans mistake.
In order to avoid losing lawyers to other organizations, they also want their organizations to get listed as qualifying employers.
Why is this lawsuit quite a big deal?
This is an issue of consumers’ trust for FedLoan servicing since everyone is worried that this company does not dispense accurate information. The primary way to track one’s progress towards PSLF is the Employment Certification Form (ECF).
Any mishap could drastically and devastatingly alter people’s lives because a lot of people are working in jobs solely for the PSLF benefit.
Court ruling states that borrowers will be protected if they can make a convincing case that their service actually did not qualify under the rules of PSLF, but was wrongly said to be so.
How this PSLF error could have happened
It is possible that the officials in charge of making PSLF determinations at FedLoan could have erroneously deemed certain organizations as eligible just by looking at their “not-for-profit” status. Most of these organizations actually do not have a clearly partisan or labor union name.
FedLoan also could have failed check to see the source of funds for these organizations and hence failed to realize that they are not government funded.
This mistake could have snowballed all the way down to the representatives responsible for communicating with borrowers.
An instance of the FedLoan disaster
This is an instance of how full of hassles working with FedLoan can be for people. A certain someone decided to finish their med school, work with a non profit for a few years and get the remaining forgiven tax free. They were not aware that applying for PSLF would cause them to have a change of student loan servicer to Fedloan.
Their previous servicer had records of them having made 36, i.e. 3 years worth of repayments. These repayments were made with Income-Based Repayment.
But unfortunately, FedLoan lost track of years of payments. The letter received by them from FedLoan servicing showed fewer repayments towards PSLF than were actually made.
This meant that they could not rely on PSLF as an option anymore.
Due to FedLoan’s incompetence, they abandoned PSLF and decided to refinance their student loans instead. What would have cost them $108,000 overall with PSLF ended up costing them $128,000 totally with refinancing. This was an unexpected expenditure of $20,000 for them that they had not anticipated since they had spent all their time working towards PSLF and making repayments accordingly.
How to protect yourself against PSLF mishaps
Always start by ensuring that your employer is actually eligible.
Then avoid making extra payments towards your loans if you are planning for forgiveness. Instead invest the money that you would have used to make extra repayments on your student loan.
Make Sure Your Finances Can Withstand PSLF Going Away Just in Case
Plan for PSLF and prepare for its repeal. Borrowers with PSLF in their promissory note will most likely qualify. There’s a good chance current borrowers can take advantage of PSLF in its current form.
Why the PSLF lawsuit is not a cause for worry
There are only two possibilities for people hoping to apply for PSLF. You are either a government employee or a 501c3 employee, in which case you qualify for PSLF. If you are not employed by them or are not working with AmeriCorps or the PeaceCorps, then you do not qualify for PSLF.
If you are relying on PSLF, you might want to check your employer’s tax status.
If your retirement account is either a 403b or 457, you may be eligible for PSLF.
Alternatives to PSLF
There are a range of options for people who do not qualify for PSLF:
Other routes to forgiveness: Despite its popularity, PSLF is not the only federal student loan forgiveness program. However, be wary of loan forgiveness scams.
Income-driven repayment: Your remaining student loan balances will be forgiven after 20 or 25 years or repayment under income-driven repayment plans. The only downside is that the forgiven amount will be taxed after your repayment term.
Refinancing: You can reduce your interest rate and even save money under student loan refinancing. You can even become debt-free faster. But remember that federal student loans lose all their federal benefits such as forgiveness programs or income-driven repayment after refinancing. You will need stable finances and a good credit to qualify.
Customer Reviews for FedLoan Servicing
The Better Business Bureau has not accredited FedLoan Servicing, nor have they rated the company. 271 complaints have been closed against FedLoan Servicing by the BBB.
The company’s customer service has been reported as being unhelpful and impolite by most customers. The public has also remarked that their website is uninformative and outdated.
Some borrowers have claimed to have a good experience getting their student loans consolidated with FedLoan.
Now, customers are required to submit an Employment Certification form to confirm that they are eligible and on track for forgiveness. Borrowers are also required a new form every year.
As already mentioned, a major portion of borrowers who hoped to apply for forgiveness were displeased to learn that their employing organizations do not qualify for PSLF. The dissipation of incorrect information regarding PSLF eligibility and its ramifications were met with widespread distaste.
TEACH grants are also handled by FedLoan Servicing. The recipients’ grants are converted into loans if they can not certify that they are completing their public service requirements. Most recipients end up with loans converted from their TEACH grants.
As with any organization, before making any bold decisions or setting any repayment plan into motion, you might want to carefully weigh the pros and cons present
If you face any issues with FedLoan’s customer service, you may contact the Student Loan Ombudsman’s office at:
By mail: U.S. Department of Education
FSA Ombudsman Group
P.O. Box 1843
Monticello, KY 42633
Since the regular customer service is reported to be not-so responsive, you may call their newly set up Ombudsman hotline. Any issues with payment or forbearance or anything that the phone representatives can not help with, call (717)7207605.
The contact number given on FedLoan’s website: 1-800-699-2908.
You may even take the help of your Senator’s office or Congressperson if you find that your PSLF payment count is wrong. People have also had success with contacting the constituent services group of their US Representative instead of waiting for a year for the manual process.
You may call or email this office and state your issues in detail. Ask them to contact FedLoan and request for a payment count review.