If you have federal student loans, there’s a good chance they are serviced through FedLoan. They are the largest loan servicer in the U.S. Just for some perspective, they currently service more than 8 million borrowers at the moment. Those borrowers equal roughly $235 billion in FedLoan’s portfolio.
That’s a lot of zeroes.
FedLoan is not a loan company, though. They are a loan servicer. That means they make sure you pay your bills on time, and they help you with any issues that might pop up over the life of your loan.
Think of them like your parents, but less forgiving. They are willing to help you out with any questions or concerns. However, if you don’t make your payments, lookout. With so many borrowers to service, they are really efficient at doing things like sending your delinquency to a credit reporting agency, contacting you repeatedly to get money out of you, and initiating the collections process.
But don’t worry, you don’t ever need to have that happen. You just need to know how to treat your loan servicer right. If you do, you won’t have anything to worry about.
History of FedLoan Servicing
FedLoan was founded in 2009, right in the middle of the recession, when lots of people were going back to school, since there wasn’t enough work to go around. The Department of Education (DOE) was hit with a bunch of new borrowers. Since the DOE was lambasted, they needed some support servicing their loans. They didn’t have the manpower to do it.
So, some companies jumped up to help them out. The DOE approved a few of these companies to help out, and FedLoan was one of them.
FedLoan is part of the Pennsylvania Higher Education Assistance Agency (PHEAA). Originally created to administer state-wide programs, PHEAA grew into a national company, and created Fedloan, and a sister company (AES), to service the whole country.
FedLoan primarily handles Federal Direct Loans and has a lot of borrowers trying to go the route of loan forgiveness.
How Does FedLoan Help Current Borrowers?
FedLoan is the place you send your student loan payments. They are the ones that send you your monthly bills, and all those annoying email reminders. On top of those things, however, FedLoan has a bunch of resources on their website to make their borrowers’ experience as smooth as possible.
First, borrowers have the ability to pay online. It might not seem like much, and should be standard … but you’d be surprised at how many brick and mortar financial institutions use good old snail mail to get things done. Borrowers have the option of making one-time and recurring payments through the user portal.
Second, they have a fairly extensive help center. If you have any questions, you can access their FAQ and browse their most frequently asked questions. It’s pretty exhaustive, so there’s a good chance, if you’re patient, that you’ll find what you’re looking for there.
However, if you can’t, FedLoan also has their contact available on the website as well. Go here to send them an email. Otherwise, you can call them at 1-800-699-2908, or send a letter here:
P.O Box 69184
Harrisburg, Pennsylvania 17106
FedLoan also has a handy payment calculator, and you can get their payment at, Prism, in both the Apple Store and on Google Play.
Issues with the New REPAYE Plan
You might have heard about the recent program the government issued a little over four months ago. It’s called the “Revised Pay A You Earn Plan.” In a nutshell, it offers students who have older loans to get similar payment terms to what they would qualify for under the “Pay As You Earn Plan.”
There’s quite a bit of allure to this new program. Loan payments are capped at 10 percent of a borrower’s income, and the balance of the loan gets forgiven after 20 or 25 years if the balance isn’t paid off. This opened up the doors for a bunch of borrowers that just couldn’t qualify for PAYE.
While the application for REPAY is a little bit confusing, servicers have not helped the process either. While the majority of the servicers are handling the applications in the required 15 day window, FedLoan is not.
As it stands, they currently have a huge backlog of application. While the Department of Education stated they think FedLoan will have the situation rectified soon, the jury is still out on that.
If you think you might want to apply for the REPAYE program with FedLoan, get ready for a long wait.
Will FedLoan Servicing be Around for Much Longer?
One thing has been pretty uniform across the board with student loan servicers: confusion. Like I said at the beginning, federal student loans used to be serviced by a single entity. In 2009 that changed dramatically.
The funny thing is, the shift to having multiple loan servicing companies made things confusing. Gone were the days of sending your payment to the company that actually owned your loan.
With everything being done with by third parties, each of whom had different websites, standard operating procedures, and contact information, a huge vacuum was created, and filled with confusion.
While the servicers have tried to keep up with the demand, they haven’t been able to do it.
In response, President Obama announced that could all change in the near future. The federal government wants to streamline the loan process, and put it all in a central location. If it goes through, you can say goodbye to all the different websites and phone numbers. There will be one place for all federal loan borrowers to go to make payments, request forbearance, and ask question.
The big question is, what will happen to the loan servicers?
While I think it highly unlikely that four multi-billion dollar companies will just disappear overnight, if this new format goes through, you can be sure that they will take a big hit.
To avoid it, the servicers will probably want to streamline their process and make things work. Who knows if that will ever happen. In the meantime, borrowers are stuck with their servicers.