In the third quarter of 2019, the Federal Reserve Bank of New York reported that there was a $20 billion increase in student loan debt from the previous quarter. Currently, U.S. students owe $1.5 trillion in student debt, and the average student loan debt is above $37,000. But FedLoan student loan servicing is one of the certified student loan servicers that can help you manage your government student loans.
Millions of other student borrowers like you may have AES-PHEAA service their loans, which might probably be by the name FedLoan. The government assigns every federal loan to a service company for collection and management purposes. And you don’t get to decide which one you want. In other words, although you borrowed your student loan from the Department of Education, you’ll not send your payments there.
The U.S. Education Department decides which loan servicing company is best based on the success rate of collecting student loans and how satisfied their borrowers are with them. When they choose the company, they serve as the borrower’s contact point for everything concerning government student loans.
The biggest of the loan service companies is the AES-PHEAA. In this guide, you’ll know everything concerning AES-PHEAA and how FedLoan student loan servicing manages your student loans.
When you take out a student loan, the U.S. Department of Education allocates a student loan servicer to you to help you repay and manage your loans. Be looking out for any form of communication from the FedLoan servicers, or other loan servicers the moment you receive your first loan disbursal. Your loan servicer, say FedLoan Servicing, will be the place to go for anything concerning your loan debt.
The loan servicers serve as a connection between you and the Department of Education. You don’t necessarily have to make any payments while in school. So, in the initial stage, the servicers will keep you up to date on somethings like loan balance and interest accumulation. Now, in case you want to return funds you didn’t need in the first place, for example, you have to deal with your loan servicer.
When you graduate from school and your grace period expires, your loan servicer will be the one to bill and receive payments. The loan servicers can also help you:
Your loan servicer can assist you in changing your repayment plan if you have difficulties with your monthly payments.
In case you have several loans, you can decide to consolidate them and get lower monthly payments by getting a fixed interest rate. Your loan servicer can help you with the process.
When you’re going through a hard time making your monthly payments, putting a hold on your monthly payments can help you get back on your feet. Again, your loan servicers can assist you with the process of acquiring the deferment or forbearance.
A parent group called the Pennsylvania Higher Education Assistance Agency (PHEAA) owns FedLoan and American Education Services (AES). In 1963, the PHEAA was established to oversee loans authorized through the Federal Family Education Loan Program. A year after its establishment, they began small with about 5,000 loans.
Today, FedLoan Servicing and AES manages about 27% of all the Education Department’s direct loans. Overall, they serve over 8 million student borrowers with a total debt of above $300 billion. The FedLoan Servicing is a new branch of PHEAA, established in 2009 in a time when the PHEAA was reorganizing.
Just like other loan servicers, if a FedLoan servicer gets assigned to you, you’ll be hearing from them regularly. It begins from while you’re in school. The FedLoan servicer is in charge of duties because they manage on behalf of the Department of Education. Some of the things they take charge are listed below:
For most student borrowers, they interact with FedLoan servicing through their online portal. Some of the things you can do on the online portal are of the following:
Side Note: Did you know you could get a reduced interest rate of 0.25% on every qualified loan if you agree to have them debit your payments automatically from your bank account?
You can use the FedLoan mobile app, which is both on iPhone and Android, to make your monthly payments.
There’s something you need to know. FedLoan Servicing, like other loan servicers, has had numerous lawsuits filed against them (more on that later). However, you don’t have to worry. The whole student loan service company has, over the years, been pushing to improve its services due to these same reports and government scrutiny.
On the FedLoan servicing website, there are educational tools to help you in your repayment journey. They include:
They also have a partnership website with AES that provides money management and budget tips for students and graduates.
Loan servicers don’t have a lot to say when it comes to the repayment plans they provide. The Department of Education determines everything. So, FedLoan servicing provides the following repayment options, just like other loan servicers:
The best way for you to see all your information about your student loan is to sign up at myFedLoan.org. You’ll have to sign in with your SSN and DOB, and then create your User ID and password. When it’s complete, you can log in and check your loan’s interest rate, statements on your loan pay off, payment history, repayment plan options, etc.
There are two federal student loans commonly known: FFEL and Direct Loans. Both of them can qualify for all or some of the numerous income-driven repayment plans:
The purpose of each program is to connect the borrower’s monthly payment to the borrower’s family size and discretionary income. In other words, the plans help you to afford and manage your repayments through your entire loan repayment period.
Previously, we mentioned how FedLoan provides Income-Driven Repayment plans and how they connect with a borrower’s family size and discretionary income. Well, to get the IBR plan, you need to apply annually through the IDR application. When you do that, it’s called recertification. Every year, you have to recertify your family size, income, and marital status. You’re basically telling FedLoan student loan what you earned the previous year, an addition to the family, whether you are still married, divorced, or single.
When you enroll in the IDR plan, it’s mandatory for FedLoan servicing to remind you that you need to recertify before the year ends. If you don’t comply, they have the authority to change your IDR repayment plan to a Standard Repayment plan.
According to FedLoan Servicing, the whole process for the recertification can be about three weeks. So it’s ideal to have your recertification done on the 10th or 11th month. Don’t worry about an increment if the recertification takes more than three weeks. You have the right to keep on making IDR payments until the FedLoan calculates your new payment.
On August 23, 2017, the State Attorney General of Massachusetts initiated a FedLoan Servicing lawsuit. She accused the FedLoan of negligence in the proper management of their loan servicing responsibilities. The FedLoan mismanagement was in the area of the Public Service Loan Forgiveness program and the Teacher Loan Forgiveness program. Each of them provides exceptional loan forgiveness benefits, but the FedLoan ruined the programs due to their incompetence.
According to the lawsuit, FedLoan mishandled the PSLF’s twelve-monthly certification process poorly that it led to thousands upon thousands of student borrowers who experienced a highly substantial amount of loan costs. It also led to frustration, stress, and wasted time trying to correct the FedLoan’s mistakes.
Under the PSLF rule, student borrowers must make 120 monthly payments, paid on time under the IBR plan, to make them eligible for the forgiveness benefit. Also, the borrowers must complete an annual certification process to show that they are not lying about their payments or income.
But according to the lawsuit, FedLoan messed up the certification process.
FedLoan’s accusation isn’t the first time. Over the years, many borrowers have come forward with multiple complaints, including highly recognized companies. For example, the Consumer Financial Protection Bureau cautioned FedLoan in June 2017 that their delays in service and mistakes will cause more significant problems for student borrowers. But apparently, nothing was done about it. Many borrowers have had significant issues relating to the annual certification process.
There are private companies that lure borrowers who are struggling to pay their government student loans with empty promises of debt relief. While in fact, what they do is to charge an unreasonable amount to enroll borrowers in free federal programs.
Not every company is a scam, but there are many scammers out there. For example, The Consumer Financial Protection Bureau closed three companies they labeled as scam companies. Also, the Federal Trade Commission shut down four companies because they worked illegally. Even if a company is not a scam and does what they say, they’re probably charging you more for something free and easy to do on your own.
You need to be extra careful about who you trust to help you with your government student loans. Some scammers have presented themselves as the Department of Education, FedLoan servicing, or even Navient. They convince people that they’ll receive FedLoan loan forgiveness for their loan debt. So you need to be extra vigilant. If not, you could end up giving thousands of dollars to scammers and end in a much worse problem.
Here are some tips to look out for in scammers:
FedLoan student loan servicing provides multiple options that match different budgets and incomes. It can help you find a permanent solution to your FedLoan loan forgiveness. But you should have a good repayment strategy to seal the success and freedom from government student loans.
Also, sometimes, clearing your student loan debt while in school means paying off the interest. It’s a good deal, and there are many ways to accomplish it. You can find a job for a few extra hours or find a way to boost your cash flow. You can use the loan budget calculator for assistance, and never forget to always evaluate your finances.
Prioritize your monthly loan debts to find out which needs more attention. Always be searching for new ways for an extra boost in cash flow. But ultimately, talk to your FedLoan student loan adviser or contact an expert to help you out.