FedLoan Servicing Student Loans – Overview and Repayment Options


Michael Brown Updated: April 23, 2019


If you have federal student loans, there’s a 1 in 3 chance that they’re being serviced by AES-PHEAA, possibly under the name FedLoan. If that sounds confusing, you’re not alone. Each federal loan is assigned to a servicing company for management and collection – and borrowers don’t get to choose which one. That means that even though you took out your loans from the U.S. Department of Education, that’s not where you send your payments after you graduate.

The government’s system for assigning loans is shrouded in mystery, but loans are sent to a handful of companies that function as the borrowers’ point of contact for everything from making payments to applying for loan forgiveness. The largest of these loan servicers is a firm with an unwieldy acronym for a name: AES-PHEAA. Here’s what you need to know about what all those letters stand for, and how FedLoan specifically manages loans.

About FedLoan Student Loans

FedLoan and AES (American Education Services) are both owned by parent group PHEAA (the Pennsylvania Higher Education Assistance Agency). PHEAA was founded in 1963 to manage loans granted through the Federal Family Education Loan Program. It started with a small portfolio of about 5,000 loans in 1964. Today, FedLoan and AES handle about 31% of the U.S. Dept. of Education’s direct loans, serving over 8 million borrowers with debt totaling almost $300 billion.

FedLoan is a newer offshoot of PHEAA. It was created in 2009, during a period of restructuring. PHEAA differs from many other federal student loan servicers in that it’s not a publicly traded company. It is a nonprofit quasi-governmental agency. Twelve of the 20 seats on its board of directors are held by Pennsylvania state legislators.

What does FedLoan do?

If one or more of your student loans is assigned to FedLoan, you will hear from the company on a regular basis, starting while you’re still in school. Like all student loan servicers, FedLoan is in charge of sending bills, processing payments, reviewing requests for deferment or forbearance, and certifying borrowers for loan forgiveness. The company also helps borrowers change repayment plans. Unfortunately, those functions don’t always go smoothly. Like many other federal loan servicers, FedLoan has been the subject of numerous consumer complaints, and the entire servicing industry has been trying to improve users’ experiences in the wake of unflattering reports and heightened federal scrutiny.

Most borrowers interact with FedLoan through its online portal, where they can sign up for direct debit, contact customer service, and use calculators to see what their monthly payments would be under different plans. Customers can get a 0.25% interest rate reduction on each eligible loan by agreeing to have payments debited automatically from a qualified bank account. FedLoan also has an mobile app that is available for users of iOS and Android.

What benefits and services does FedLoan provide?

FedLoan has educational content on its main website, including calculators, articles, videos, and FAQs. It also shares a companion site with sister company AES called “You Can Deal With It” that has budgeting and money management tips for college students and recent grads. FedLoan maintains a Twitter account with timely bulletins and news updates for borrowers. There are a number of ways to reach FedLoan’s customer service support team including chatting online, calling, or e-mailing questions.

What repayment options does FedLoan offer?

When it comes to federal student loans, servicers don’t have much say in the repayment plans they offer. The list is dictated by the U.S. Department of Education. So like all of its rivals, FedLoan offers the following prescribed set of repayment options:

  • Standard Repayment, with fixed monthly payments over a 10-year period.
  • Extended Repayment, with fixed monthly payments over a 25-year period.
  • Graduated Repayment for people who expect their incomes to increase over time. Monthly bills start low and ratchet up at regular intervals over a 10- or 25-year term.
  • Income-driven repayment plans, with monthly payments that are capped at 10-20% of the borrower’s discretionary income and qualify for loan forgiveness after 20-25 years.

To make sense of all the different plans, FedLoan has a “repayment schedule estimator” tool at the bottom of the page where they are described.

How does FedLoan help struggling borrowers?

If you’re having trouble making payments on your FedLoan-serviced loan, don’t ignore the problem. Most borrowers will contact FedLoan immediately, and there are a few specific remedies they can offer to keep you in good standing and help prevent your loan from falling into default:

  • If you’re unemployed, underemployed, or experiencing economic hardship, you might qualify for forbearance or deferment.
  • Income-driven plans can reduce your monthly payments.
  • Extending the term of your loan can also lower your monthly payments.

A word of caution, though: While these measures may help ease your stress in the short term, most will keep you in debt longer and increase the total amount of interest you’ll pay. Servicers like FedLoan can’t do the one thing that is most helpful for struggling borrowers: lowering your interest rate.

Are there other options to manage my student loans?

Many people with FedLoan-serviced debt have been able to negotiate much better terms by refinancing their student loans with private lenders. Refinancing is especially beneficial for those who took out their loans before 2014 and are paying more than 4% interest. In a recent analysis we found that people who refinanced with private lenders saved an average of $259 a month and $19,231 over the life of their student loans. If you have more than one student loan, you can also consolidate them into a single monthly bill, making it easier to keep track of your payments and monitor your progress toward financial freedom.

The private student lending industry has responded to widespread borrower frustration with a surge of innovation. As a result, it’s easier than ever to find out if refinancing or consolidation can save you money. Most online applications take less than 5 minutes, with no impact to credit.

Curious about whether you could be getting a better deal on your student loans? Find out now with the highly-rated lenders listed below...

FedLoan Servicing Contact Information

Office Hours: M-F: 8:00 AM - 9:00 PM (EST)

Email

Phone:  1-800-699-2908

Mailing Address:

FedLoan Servicing
P.O. Box 69184
Harrisburg, PA 17106-9184

Website: https://myfedloan.org/


Click here for more information on the other main student loan servicers.

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