Is FedLoan Servicing Legit?


Katie Taylor Updated: January 16, 2020

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-Student-Loan-Company-685091-edited

The 411 on FedLoan Servicing

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. 

The FedLoan TEACH Grant debacle 

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. 

See also: The Ultimate Guide to Teacher Student Loan Forgiveness

The letter you probably missed

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: 

  • You completed your required four years of qualifying teaching within your eight-year TEACH Grant service obligation period, or
  • If you have not yet competed all four years of required teaching, but you are currently working, or expect to work, in a position where you will be able to complete your required four years of teaching within the TEACH Grant service obligation period.

See also: Student Loan Servicers: Who They Are & Where To Find Them  

Imagine Life Without a Student Loan Payment... Start Saving Now!

How to avoid a student loan scam

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:

  • requests for fees
  • promises for immediate loan forgiveness
  • aggressive tactics
  • questions about personal account information
  • grammatical errors 

See also: Student Loan Payoff Scam Alert: 5 Red Flags to Look Out For

And before you do anything with a letter about your student loans, find out if it's actually from your loan servicer.

How to find out who your loan servicer is

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.  

What to do if FedLoan is your servicer 

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.  

See also: Should You Refinance Your Federal Loans Through a Private Lender?

Refinance & Save Today With These Leading Lenders

#1 - Nitro Recommended View More Details

Special offers for medical resident and fellow refinance products

  • Fixed rates: 4.39% - 9.24% APR
  • Variable rates: 2.50% - 9.24% APR
  • Minimum credit: 650
View More Details
Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with some of the lowest fixed in the industry which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.

#2 View More Details

SoFi is the leading student loan refinancing provider. 

  • Fixed rates: 3.99% - 8.24% APR
  • Variable rates: 2.49% - 7.99% APR
  • Minimum credit: 650
View More Details
Visit SoFi View Loan Disclosure

$30 billion+ in refinanced student loans. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, there's no maximum on the amount you can finance. Some state restrictions may apply.

  • Serious savings: Save thousands of dollars thanks to flexible terms and low fixed or variable rates.
  • No hidden fees, no catch: No application or origination fees. No pre-payment penalties.
  • Fast, easy, and all online: Simple online application and access to live customer support 7 days a week.
  • Access to member benefits: SoFi members get career coaching, financial advice, and more—all at no cost.
  • 98% of surveyed members would recommend SoFi to a friend

Save thousands on your student loans and pay off your loans sooner. Find your rate.

#3 View More Details

Works with 300+ community lenders for higher approval chances

  • Fixed rates: 2.49% - 7.75% APR
  • Variable rates: 1.90% - 5.25% APR
  • Minimum credit: 660
View More Details
Visit LendKey View Loan Disclosure

Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 300+ community lenders for higher approval chances
  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

Get a personalized quote from LendKey now.

#4 View More Details

Best for borrowers who want to customize their repayment schedule to pay off debt fast.

View More Details
Visit Earnest View Loan Disclosure

Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

I reduced my student loan payment by $152 per month, by refinancing thru Nitro

Save Money Now