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 only 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. FedLoan services Federal Family Education Loans (FFEL) and Direct Loans, and they're one of only a few organizations approved by the U.S. Department of Education to do so.
Unfortunately, FedLoan Servicing has recently been connected with a significant scandal impacting thousands of borrowers and has a reputation for poor customer service.
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 after an audit by the Government Accountability Office showed some problems. The Department of Education found that approximately 10,776 grant recipients had their grants converted to loans because of errors 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 that the grant recipients should be contacted and offered the opportunity to have their loans reinstated as grants.
Unfortunately, FedLoan's response to the issue was a bit perfunctory. 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. 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:
"Recently, we asked our TEACH Grant Servicer, FedLoan Servicing, to perform a quality review of TEACH Grants that were converted to loans to determine if the conversions were consistent with the program requirements outlined in the Agreement to Serve (ATS) that you signed before you received your TEACH Grants. Through this review, we learned that your TEACH Grants may have been converted to loans prematurely by your previous TEACH Grant servicer."
At the end they provided a "Request for TEACH Grant Reinstatement" form to fill out and send in.
Only 15% of those whose grants were converted to loans responded to the letters—perhaps in part because of a title that didn't indicate the seriousness of the issue and the letter's lack of clarity. Another subset of grant recipients had their grants converted to loans because of minor errors, like paperwork mistakes, and FedLoan is making no move to restore those to their original grantee status.
Other borrowers have received delinquent notices and been sent to collections when payments they made to FedLoan were not correctly applied to their accounts.
If you've received a letter from FedLoan Servicing about your TEACH grant, fill out the included form and send it in (if you still have the letter). If you had a TEACH grant that is now a loan, contact FedLoan to request that the error be corrected ASAP.
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 requests for fees, promises for immediate loan forgiveness, aggressive tactics, questions about personal account information, and grammatical errors.
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.
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 your loans are serviced by your lender. Do some comparison shopping to see which lenders provide the best terms and the best customer service, then take control of your debt.
Earnest empowers people with the financial captial they need to live better lives.
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.
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Many ELFI customers save hundreds per month month and thousands over the length of the loan term.
Education Loan Finance is designed to assist borrowers through consolidating outstanding education loans into one single loan that effectively lowers your costs of education and/or makes repayment very simple. Education Loan Finance - backed by the strength of SouthEast Bank - combines the benefits of traditional education loan refinancing with the superior products, service, and support found in the private market.
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Attractive Bonus and Referral Programs:
Works with 275+ not-for-profit community lenders for higher approval chances
LendKey operates student loan programs for over 275 not-for-profit and community lenders across the country. 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.
Operates in all 50 states; 2nd largest student loan refinancing lender
Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.
For every loan they fund, they contribute to the education of a child in need
CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.
Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.
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Offers unemployment protection and career/coaching/networking
SoFi, which stands for “Social Finance,” was created by a group of Stanford business students who found themselves with a mountain of debt after graduation. They set out to change the student loan industry and help borrowers like themselves to get lower interest rates. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, it has no maximum amount you can finance. However, Nevada residents can’t currently refinance with SoFi. Minimum loan balances are higher in Arizona, Massachusetts and Pennsylvania due to state laws. Additional state restrictions may apply.
Special offers for medical resident and fellow refinance products
Splash Financial is a leader in student loan refinancing with new rates as low as 3.25% fixed APR 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.
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