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The U.S. Department of Education (ED) originates federal student loans, but it doesn’t directly collect student loan payments. The ED assigns you a federal student loan servicer, such as FedLoan Servicing, when it disburses your loan. This is the company that you’ll actually be paying.

You’ll also have to deal with your servicer if you have questions about your loans during repayment, want to change repayments plans, or want to place your loans in deferment or forbearance.

What is FedLoan Servicing?

FedLoan Servicing was established by the Pennsylvania Higher Education Assistance Agency (PHEAA) to support the U.S. Department of Education’s ability to service student loans owned by the federal government. Along with Nelnet and Navient, it is one of the big three for-profit federal student loan servicing companies. There was a fourth for-profit servicer, Great Lakes Educational Loan Services Inc., but Nelnet acquired it in February 2018.

There are also several non-profit federal student loan servicing companies, but they only serve a small percentage of borrowers’ loans.

PHEAA conducts its student loan servicing operations for federally-owned loans as FedLoan Servicing. Another arm of PHEAA — AES — guarantees and services a variety of Federal Family Education Loan (FFEL) Program and private student loan products for lending partners.

FedLoan Servicing stands apart from the other federal student loan servicing companies because it was chosen to help manage the Public Service Loan Forgiveness (PSLF) program. Borrowers who submit an Employment Certification form, which the ED advises you do as soon as possible if you’re considering PSLF, will have their federal loans transferred to FedLoan Servicing.

Unfortunately, FedLoan Servicing and MyFedLoan reviews indicate borrowers are sometimes disappointed by the services they receive.

Finding your loan servicer(s)

Your loan servicer may have contacted you after your first loan was sent to your school. But if you’re not sure which company services your loans, you can always find out by logging into the National Student Loan Data System using your FSA ID (which you likely created when you first submitted your FAFSA).

You could also have several federal student loan services. Or, the ED may have transferred your loans from one servicer to another, which it can do without your permission. When this happens, your new servicer should send you a welcome letter with its contact information and steps to get set up with a new account.

Is FedLoan Servicing a Scam?

FedLoan Servicing is one of a limited number of organizations approved by the U.S. Department of Education to service these loans and says it’s dedicated to supporting borrowers with easy and convenient ways to manage their repayments.

Loan Eligibility

FedLoan Servicing services two main types of federal loan programs: FFELP and the William D. Ford Federal Direct Loan Program loans.

FedLoan Servicing services FFELP loans that were sold and transferred as a result of legislation known as the Enduring Continued Access to Student Loans Act (ECASLA), under which the U.S. Department of Education offered to purchase FFELP loans from third-party lenders.

FedLoan also services direct loans provided directly though the U.S. Department of Education and don’t involve third-party lenders.

Consolidation Eligibility

To qualify for a Direct Consolidation that may be serviced by FedLoan Servicing, the borrower must be out of school and have at least one Direct Loan or FFELP loan that is in grace, repayment, deferment, forbearance, or default status. Loans that are in in-school status are not eligible for consolidation.

If a loan is in default, the borrower can only consolidate the loan under two conditions: the borrower must agree to repay the loan under an income-driven repayment plan, or make payment arrangements with the current loan servicer.

Loans that have been consolidated already can also be reconsolidated, but only under specific conditions. See which loans are eligible to be consolidated here.

Consolidation can increase the total repayment period from 10 to up to 30 years, depending on the repayment plan selected by the borrower. The borrower’s new interest rate on the Direct Consolidation Loan is a weighted average of the interest rates of the underlying loans.

Repayment

Unless borrowers choose another option, loans serviced by FedLoan Servicing are enrolled in the standard 10-year repayment plan. All Direct PLUS Loans are also eligible for income-driven repayment except Direct PLUS Loans made to parents.

Note that not all FFEL Program loans are eligible for income-driven repayment. However; some maybe eligible if included in a Direct Consolidation.

FedLoan Servicing offers the following options for repayment, depending on eligibility:

  • Pay As You Earn
  • Income-Based Repayment
  • Income-Contingent Repayment
  • Standard Repayment
  • Graduated Repayment
  • Extended Fixed Repayment
  • Extended Graduated Repayment
  • Income Sensitive Repayment

FedLoan Servicing borrowers can enroll in Direct Debit, which is a free service that allows for a 0.25 percent interest rate reduction for approved applications that agree to automatic withdraw each month.

Borrowers can also allocate additional funds to loans of their choosing in order to target repayment for faster payoff. Payments can be made online, via smartphone, or by mail.

FedLoan Servicing Reviews

FedLoan Servicing is not accredited by the Better Business Bureau, and the bureau has not rated the company. In the last three years, the BBB has closed 271 complaints against FedLoan Servicing, including 118 in the last 12 months.

Some public reviewers have criticized the company’s customer service as unhelpful and impolite. Others have complained that the FedLoan’s main website is outdated and uninformative.

But other borrowers attest that they have had no issues with FedLoan Servicing, having had a positive experience with loan consolidation.