So, you just got a notice saying you need to register your student loans with FedLoan, and you're wondering if it's a scam.
Here's the scoop: FedLoan Servicing is a legit company. It's one of several student loan servicers contracted by the U.S. Department of Education to handle federal student loans.
FedLoan Servicing has been around for about a decade.
The Pennsylvania Higher Education Assistance Agency (PHEAA) created FedLoan Servicing in 2009 to help the U.S. Department of Education service federal student loans—specifically, Federal Family Education Loans (FFEL) and Direct Loans. They're one of only a few organizations approved by the U.S. Department of Education to do so.
Unfortunately, FedLoan Servicing has a reputation for poor customer service, and it was connected with a significant scandal in 2018 that continues to impact borrowers.
In March 2018, NPR reported that thousands of teachers were facing significant debt loads after their federal grants had been unfairly and incorrectly converted into loans.
Here's the backstory. In 2015, the U.S. Department of Education performed an audit on the TEACH grant program and found that more than 10,000 grant recipients had their grants converted to loans because of errors made by the loan servicer.
FedLoan was not the loan servicer at the time, but the Department of Education brought them in to handle the problem. The Department told FedLoan to contact the grant recipients and offer them the opportunity to have their loans reinstated as grants.
Unfortunately, FedLoan's response wasn't quite as committed as any grantee would hope.
They did contact the grant recipients ... with a single mailed letter. They didn't check to make sure the addresses they had on file were correct or follow up with anyone who didn't respond.
Plus, the letter itself stated that the grants were changed to loans prematurely, not incorrectly.
The letters, titled "INFORMATION ABOUT YOUR TEACH GRANTS THAT WERE CONVERTED TO DIRECT UNSUBSIDIZED LOANS," began with a wordy paragraph that sounded like a standard form letter and failed to emphasize that a serious mistake had been made by a loan servicer.
At the end of the letter, they provided a form—"Request for TEACH Grant Reinstatement"—for the recipient to fill out and send in.
Only 15% of those whose grants were converted to loans responded to the letters—probably because the letter's title didn't indicate the seriousness of the issue and the letter itself lacked clarity.
Another subset of grant recipients never even received letters. Their grants were converted to loans because of minor errors, like paperwork mistakes. FedLoan is making no move to restore those to their original grantee status.
Since the issue came to light, the U.S. Department of Education contacted grantees via email and created a webpage for grantees with additional information about TEACH grant reconsideration. If you had a TEACH grant that is now a loan, contact FedLoan immediately to request that the error be corrected.
To have your TEACH grant reinstated, you must show that:
Unfortunately, there are companies out there that prey on student loan borrowers, so if your instinct was to question this letter from a loan servicer you've never heard of, it was a good one. While FedLoan Servicing is legit, that doesn't mean every notice you get is.
If you've been contacted by a company about your student loans, watch out for these red flags:
And before you do anything with a letter about your student loans, find out if it's actually from your loan servicer.
At this point, if you don't know who your loan servicer is, you're not alone. Many people don't. Here's how you find out:
1. Head over to the National Student Loan Data System and click on "Financial Aid Review."
2. You'll have to accept the terms and conditions and then log in with your FSA ID. If you don't have an FSA ID, there's an option to create one.
3. Once you log in, you'll see a list of your loans. You can click on the numbered identifier for each loan and then see the loan servicer's name and address at the bottom of the page.
As a group, federal loan servicers don't have stellar reputations—and FedLoan is no different.
Unfortunately, you don't have any control over who your servicer is if you have federal loans with the U.S. Department of Education. But that doesn't mean you're out of luck.
Refinancing your student loans is one option for maintaining a bit more autonomy over your loans.
You decide who your loan servicer is because you choose a lender, and then they service your loans. Do some comparison shopping to see which lenders provide the best terms and the best customer service. Then take control of your debt.
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