FedLoans Announces Exit of Federal Loan Servicing: Good Riddance, or Good Grief?
As you may have seen, FedLoans dropped a bomb on those of us near to the student loan world by announcing last week that they don’t intend to renew, or extend, their contract with the Dept. of Education which ends in December. They currently service federal loans for about 8.5 million borrowers… and are the contracted servicer for PSLF (1.2 million borrowers and growing), which makes this news of particular interest to us…
As the title of this posting indicates, while their track record hasn’t exactly been impressive over the years, a hasty FedLoans exit is potentially disruptive for borrowers as it aligns closely with the CARES Act payment halt ending on Oct 1st, when 23+ million borrowers are scheduled to go back into repayment.
Will this news cause Biden to extend the payment halt? Perhaps…. but extending an emergency relief plan goes against the message of economic recovery otherwise being promulgated. We won’t be so brazen as to guess what will happen, but we WILL keep you updated here… and we are confident that no matter the outcome, PSLF participants will not be in jeopardy if they continue to meet the program’s core requirements.
THAT said, given this news and with the understanding that FedLoans could bow out as early as December 14th, borrowers pursuing loan forgiveness should isolate and save the following documentation:
- Employment Certification Forms and all reports of qualified payments made from FedLoans. We do NOT suggest submitting new ECF forms presently, as loans have not been properly counted in accordance with federal guidance during the CARES Act forbearance. We’ll likely guide borrowers to do this after the transition away from FedLoans.
- History of ANY and ALL qualified payments made that have not already been counted as qualified by FedLoans.
Longer term, we are hopeful that the new servicer(s) will perform better for borrowers. In the interim, coming out of CARES, if you’re uncertain of your strategy, make sure you have advocates like Doctors Without Quarters and PSLFjobs in your corner.