What does this mean for borrowers?

Dealing with a new servicer is always a headache, but by specializing in commercial PLUS loans, the hope is that servicer guidance will be more accurate.

Most importantly, if you have loans serviced by Sloan, the odds are pretty good that you are missing opportunities for lower monthly payments and earlier loan forgiveness. The key nugget of information is that commercial FFEL loans can usually be converted to borrower-friendly federal direct loans.

What are commercial FFEL loans, and why were they moved to Sloan Servicing?

The Federal Family Education Loan (FFEL) Program was created to help more Americans afford college. Students could borrow from a private lender, and the federal government guaranteed the loan would be repaid. In 2010, the government discontinued the program and stopped using banks and lenders as intermediaries between students and the federal government. Many of the loans created during this program are still commercially-held loans.

If you have loans with Sloan Servicing, you have commercial FFEL loans. In other words, you owe money to a third-party lender, but the federal government continues to guarantee the debt. 

The good news in this situation is that commercial FFEL loans are still federal loans. Borrowers may have to jump through some hoops, but it is possible to transfer the debt away from Sloan Servicing and qualify for repayment plans like SAVE and forgiveness programs like Public Service Loan Forgiveness.

Enrolling Sloan Servicing Loans in SAVE and Public Service Loan Forgiveness (PSLF)

The problem with Sloan Servicing Loans is that they are commercial FFEL loans, and these loans are not eligible for PSLF or SAVE.

However, borrowers can consolidate the debt into a federal direct consolidation loan to gain eligibility. The consolidation process repays the commercial loan in full and creates a new loan funded by the federal government. For most FFEL borrowers this means eligibility for SAVE and PSLF.

Additionally, borrowers who consolidate before June 30, 2024, can maximize their credit from previous payment activity. In the past, consolidated restarted progress toward loan forgiveness. Right now, it can potentially speed up the forgiveness clock.

Exceptions for Parent PLUS and Spousal Consolidation Loans. Within the already complicated world of commercial FFEL loans, some loans are extra complicated.

If you have Parent PLUS loans, you can still consolidate to gain eligibility for PSLF, but you won’t be eligible for SAVE unless you use the double-consolidation loophole.

Spousal consolidation borrowers will need to wait for new regulations to be implemented before they can take any action on their loans.

Consolidation Tips for Commercially-Held Loans

Most borrowers will find that consolidating their commercially-held FFEL loans is the best approach.

Opting for a federal direct loan means fewer strings attached and more repayment and forgiveness opportunities. The one-time IDR count update also removes much of the guesswork for people who consolidate before June 30, 2024.

Consolidating their loans gives borrowers the unique opportunity to choose their loan servicer. Generally speaking, there is no loan servicer with a great reputation, and all loan servicers must follow the same rules, so there is no strategic advantage to choosing one over the other. 

That said, at the time of this article, MOHELA hold times appear to be consistently longer than most other servicers, so choosing anyone else is recommended. Sadly, MOHELA is unavoidable for those pursuing PSLF. If you plan on pursuing PSLF, you should pick MOHELA, as they handle all PSLF borrowers.

When to Stick with Sloan Servicing

If most borrowers should consolidate their commercial FFEL loans right now, what is the exception to the rule?

The narrow exception right now is for people who have a premium interest rate on their loans. When some commercial lenders offered consolidation services, they also offered an interest rate discount to some borrowers. If your federal loan interest rate is extremely low, you may be receiving this discount. If you are unsure of whether or not you have a rate discount, call Sloan Servicing to ask.

The problem with consolidation for people with a rate discount is that the new direct consolidation loan will revert back to the statutory interest rate.

The interest rate change is an acceptable consequence for borrowers who desperately need SAVE or are pursuing PSLF. However, if you are likely to repay your loan in full without needing SAVE or PSLF, it could be preferable to stick with Sloan Servicing.

The ideal approach will depend on your other debts, loan balance, and financial situation.

Contacting Sloan Servicing

If you need to reach Sloan, their phone number is 833-597-5626.

Crucially, Sloan also offers borrowers the chance to contact them via email. When possible, communicating with lenders via email is ideal. The email form is available here.

The post Navigating Sloan Servicing: The Guide to Loan Repayment Options and Forgiveness appeared first on The Student Loan Sherpa.

Consolidation is quite straightforward: it replaces your old loans with a new one. You can consolidate just some or all of your loans.

After consolidation, your old loans are considered paid off, and you start repaying a new loan, ideally with better terms.

For AidVantage loans, you have two consolidation options: federal and private. Federal consolidation is done through the Department of Education, while private consolidation, often called refinancing, is through a private lender. These two options have major differences, so it’s crucial to choose wisely. Once you consolidate, you can’t reverse the process, so any decision you make is final.

Sherpa Note: This article originally covered Navient student loan consolidation. When Navient changed its name to AidVantage, this article was updated to reflect the new name.

Federal Direct Consolidation

The main benefit of federal loan consolidation is that you keep all the federal loan benefits, such as income-driven repayment plans and student loan forgiveness. Plus, anyone can consolidate their federal loans without needing to meet credit or income criteria.

The downside is that consolidating your federal loans doesn’t lower your interest rate. It just groups your loans. The goal behind a federal consolidation is to gain eligibility for preferred federal programs.

The danger is that federal loan consolidation might not be the best move for everyone. Mixing certain federal loans could disqualify you from the best repayment options. It’s important to weigh the advantages and disadvantages before proceeding.

Finally, you can only consolidate federal student loans into a federal loan consolidation. If you hope to convert your private loans into federal loans to get on IBR or qualify for student loan forgiveness, you are out of luck. Absent an act of Congress, this financial move is not possible.

Private Consolidation aka Student Loan Refinancing

When you explore the market for refinancing lenders, you’ll find many lenders advertising lower interest rates. Lowering your interest rates can reduce your monthly payments and help you pay off your loan sooner.

All types of loans, including federal ones, can be refinanced into private loans. However, if you’re considering refinancing your federal loans into a private loan, be cautious. While refinancing at lower interest rates can save you money, you’ll lose the benefits that come with federal loans, which is an important factor to consider.

If you decide to refinance, you’ll need a good credit score and a stable income. Since requirements and offers vary by lender, it’s wise to compare options from different companies.

	Splash is extremely focused on interest rates. They consistently have the lowest rates in numerous loan categories. Read more...
	ELFI is a traditional bank with a major focus on quality customer service. Getting approved is hard for some borrowers, but those that do get approved receive excellent interest rates. Read more...
	SoFi is the biggest name in the student loan refinance space. They consistently offer excellent rates with high approval numbers. Read more...
	Earnest attempts to look at the big picture for borrowers. The application requires a bit more information, but it doesn't take long to complete, and could result in an approval where other lenders might reject. Read more...
	LendKey partners with smaller banks and credit unions across the country. This approach results in higher approval numbers and competitive loan terms. Read more...

One thing many people forget about credit scores is that shopping around doesn’t hurt your credit score. As a result, it pays to apply at several places to find the best rate.

How To Start the Consolidation Process on AidVantage Loans

Given the enormous differences between private refinancing and federal consolidation, it shouldn’t be much of a surprise that starting each process is dramatically different.

Because the process is identical regardless of loan servicer, AidVantage borrowers will have the same consolidation process as MOHELA, Nelnet, and others. Additionally, AidVantage has no ability or authority to stand in the way of either process.

Federal Direct Consolidation – The Department of Education handles all federal student loan consolidation requests. Borrowers can start the consolidation by applying through this portal from the Department of Education. Completing the application usually takes less than half an hour. However, the full process takes several weeks or even months before the Department of Education finalizes everything.

Refinancing with a Private Lender – To refinance with a private lender, a borrower must pass a credit check to get approved. I usually recommend shopping around to get the lowest interest rate. This adds a bit of extra time to the process but can result in significant savings. Our student loan refinance company list has links to the various lender application forms. The entire private refinance process can be done in as little as a week from start to finish.

Consolidating AidVantage Loans

Just because you can’t pay off your AidVantage loan tomorrow or next week doesn’t mean you are stuck with the same loan and the same terms for years to come. Student loan consolidation offers ways to get lower payments, lower interest rates, change servicers, and pay off your loan faster.

The post How to Consolidate AidVantage Student Loans appeared first on The Student Loan Sherpa.

Federal student loans offer more favorable repayment plans and forgiveness opportunities. To get rid of private student loans, you often need to use different tactics.

If you have loans with AES, it might not be clear if they are federal or private. Fortunately, it’s easy to find out for sure.

How to Tell if Your AES Loans are Federal or Private

If you are looking for certainty, the best option is to visit studentaid.gov and pull up your account.

The Department of Education runs studentaid.gov, and they keep detailed records of all federal student loans. These records include loan balances, interest rates, and servicer information.

If your AES loans don’t appear in this federal database, they are private loans.

Are You Lost? Navigating studentaid.gov isn’t always easy. If you want turn-by-turn directions to find your loan information, use this guide to navigate the federal database.

Private or Commercially-Held Federal Loans

One of the trickiest types of student loans to understand is the privately-held federal loan.

Before 2010, private lenders could offer loans guaranteed by the federal government through the Federal Family Education Loan Program (FFELP). While private companies provided the money and collected interest, the government would cover the payments if the borrower didn’t pay.

These loans count as federal loans for borrowers but aren’t directly held by the government. FFELP loans offer some federal benefits, like qualifying for Income-Driven Repayment plans, but they don’t qualify for Public Service Loan Forgiveness.

Many borrowers choose to use a federal direct consolidation loan to address FFELP loan eligibility issues. Direct consolidation converts the privately-held loan into a federally-held loan.

To figure out if your loan is privately-held, here’s a simple tip: if you had to keep making payments during the Covid-19 payment freeze, your loan is privately-held. If you didn’t have to make payments, it’s federally-held.

Tips for Borrowers with AES Federal Loans

One of the many perks of having federal student loans is that the rules are the same regardless of who services your loans. In other words, AES federal loans have the same repayment plans and forgiveness options as Navient, MyFedLoan, and MOHELA federal loans.

Many federal borrowers just look for the repayment plan with the lowest monthly payment. However, the best approach is for borrowers to develop a plan to eliminate their loans. In some cases, it means pursuing the various options for student loan forgiveness.

When picking a repayment plan, there are many different options and strategies to consider. If you want estimates on monthly payments, the Department of Education’s Loan Simulator can use your actual loan information to predict monthly payments on the various plans.

Tips for Borrowers with AES Private Loans

Private loans are notoriously more strict than federal student loans. Monthly minimum payments are often large, and forgiveness options are rarely available.

For this reason, many borrowers elect to pay off their private loans as quickly as possible — even if the loans have lower interest rates than the federal loans.

Because AES is the servicer of the loans and not the lender, they usually can’t offer borrowers much flexibility beyond what is specified in the original loan contract. When borrowers are struggling or looking for help, AES stands between the borrower and the lender. If you have a specific request, sometimes the best route is to ask AES to ask the loan holder.

Unfortuantely, there isn’t an option to easily convert AES private loans into federal loans.

Simplifying Private Loan Repayment: A popular option is refinancing your private loans with a new lender. Borrowers can refinance to get lower interest rates and to work with a new lender.

Refinancing is risky for federal borrowers, but because private loans don’t have income-driven repayment plans or student loan forgiveness, refinancing private loans is much safer.

If your interest rates are high or you are unhappy with your servicer, be sure to check out the guide to student loan refinancing.

How to Contact AES

To avoid disputes about who said what, I recommend that borrowers communicate with their lenders and servicers via email. AES borrowers can send an email directly to AES.

Borrowers can call AES at this number: 1-800-233-0557.

AES uses several different addresses, depending upon what you are mailing:

Additionally, AES has a consumer advocate. This office can help you if you believe AES has made a mistake. Contact information for the consumer advocate is available here.

The post Are AES Loans Federal or Private? appeared first on The Student Loan Sherpa.

Was there student loan forgiveness or cancellation? Did someone else pay off my debt for me? Was there a lender error that means I’m debt-free?

There are several reasonable explanations for the zero-dollar balance. In some cases, a borrower truly is free of their debt. In others, the debt moved.

When a Zero Balance Means Loan Forgiveness

The Department of Education is performing a one-time audit of borrower payment histories and giving borrowers credit for months that previously didn’t count.

For example, prior payments on the standard repayment plan, as well as some deferments and forbearances, may now get credited as progress toward loan forgiveness.

Borrowers who had their balances forgiven should receive an email from their lender. Additionally, their servicer portal should also show that the loans were forgiven under the IDR adjustment.

If you got an email and see this language on your servicer portal, congratulations!!

Sherpa Tip: The one-time adjustment is happening right now for the borrowers close to earning forgiveness. For other borrowers, it will take place in the summer of 2024.

In most cases, borrowers do not need to take any action. However, some will need to consolidate their loans by June 30, 2024.

The Disappointing Reason Your Federal Student Loan Account has a Zero Balance

Sadly, a zero balance on a servicer portal doesn’t always mean loan forgiveness.

In some cases, it just means your loans got moved to a new servicer.

Unfortunately, this is a pretty common occurrence. The federal government has contracts with several different loan servicers. Sometimes these contracts are renewed; other times, a new company gets the contract.

In some cases, only certain loans get moved. Thus, it is possible your balance dropped significantly but didn’t go all the way to zero.

Sherpa Thought: These transfers shouldn’t be so confusing for borrowers. If servicers or the Department of Education did a better job notifying borrowers, people wouldn’t be surprised to see a $0 balance.

Tracking Down Transferred Loans and New Servicers

To the credit of the Department of Education, they do a nice job helping borrowers track down the appropriate servicer.

Within the studentaid.gov website, there is a database of student loans that borrowers can access. Within this database is a breakdown of every loan and the company responsible for servicing the loan.

If I saw an unexpected drop in my federal student loan balance, studentaid.gov would be my first stop. Because navigating to individual loan information is a bit complicated, I’ve put together this guide on accessing the records.

The Public Service Loan Forgiveness Waiver

If you previously applied for Public Service Loan Forgiveness, your loans may also be forgiven.

On October 6, 2021, President Biden announced that the Public Service Loan Forgiveness rules were temporarily changed. Previous payments that didn’t count because the borrower was on the wrong repayment plan or the loans were not eligible may now count.

If you have previously applied for Public Service Loan Forgiveness or completed an Employer Certification Form, the Department of Education may have reconsidered your application.

This article breaks down the new program and rules in more detail.

Other Possibilities for a Federal Student Loan Balance Drop

A balance transfer or PSLF may be the most likely explanation, but other possibilities exist.

For example, President Biden recently announced plans to cancel $1 billion worth of student loans for borrowers defrauded by their schools. This is a continuation of an Obama-era program that was significantly limited during the Trump years.

However, it is worth noting that the borrower defense to repayment cancellation only happens to borrowers who successfully apply to have their loans canceled.

Another slight possibility is if Congress or the President chose to cancel large amounts of student debt for all borrowers. As of the date of this article, no such plans exist. Even though there is some support for massive forgiveness, it is far from a certainty. Additionally, if something like that did happen, it would be all over the news.

Preventing the Transfer to Another Servicer

Federal servicer transfers can be a significant issue for borrowers. And the problems go beyond the disappointment of learning a zero-dollar federal student loan balance just means the debt has moved.

A change in servicers can have many negative issues for borrowers:

• Payments may be missed due to auto-debit issues.
• Frequent servicer changes open the door to fraud.
• Payments may be missed because banks mailed checks to old servicers.
• Important records and communications may get lost.

Worst of all, borrowers have very little power to prevent a servicer change. If your student loans are on the move, take these steps to streamline the process and avoid issues.

The post Why Did My Federal Student Loan Balance Drop to Zero? appeared first on The Student Loan Sherpa.

New federal data shows how bad things have gotten: 2 out of every 5 borrowers haven’t been able to pay their bills.

Based on my conversations with borrowers, there are three primary reasons people haven’t made payments.

Issue 1: Servicer Problems are a Roadblock to Making Payments

At this point, federal student loan servicing at the restart has been a well-documented mess.

Expecting borrowers to wait for an hour or two on hold is unreasonable. Likewise, giving borrowers conflicting information will only create more problems.

It’s hard to fault borrowers for not making payments when servicers are not charging them the right amount or when they can’t even talk to a person to get their questions answered.

The hope is that things will gradually calm down and that servicers will be sufficiently incentivized by the Department of Education withholding payments.

For now, borrowers will need to be patient and strategic in how they interact with servicers. Sadly, it is impossible to avoid interacting with servicers in most cases.

Looking Closer: The Department of Education seems to agree that this is the most pressing issue for borrowers. In a blog post, they explained that many borrowers didn’t make payments because they were “confused or overwhelmed about their options.”

Issue 2: Unaffordable Monthly Payments

I’ll preface this issue by saying the new SAVE plan is awesome. Borrowers can get lower monthly bills and even qualify for a subsidy that could be worth hundreds of dollars each month.

The borrowers who benefit the most from SAVE are the lower-income borrowers who qualify for $0 per month payments.

The middle-income borrowers appear to be struggling the most. SAVE lowers their monthly bills, but in many cases, finding an extra $100 or $200 per month is a significant hardship.

If monthly payments were more affordable, more than 60% of borrowers would make payments.

Sherpa Thought: This particular issue is likely a smaller problem than issue one. SAVE may not be a perfect repayment plan, but it is by far the best option available for most borrowers, and the vast majority of borrowers should find it affordable.

About 3 million borrowers have already qualified for $0 per month payments on SAVE.

Issue 3: Bad Advice About the Restart

Long before the restart, the Department of Education announced an on-ramp to help borrowers transition back to repayment. This on-ramp has been a critical resource for the 40% of borrowers not making payments so far.

During the on-ramp period, which lasts through September of next year, borrowers won’t face negative credit reporting or aggressive debt collection tactics from the Department of Education.

Unfortunately, some in the media have mischaracterized this program. Many have claimed that federal borrowers don’t need to make payments for the first year. For the vast majority of borrowers, skipping payments during this time is a terrible idea.

By not making payments during the on-ramp, borrowers lose out on valuable progress toward forgiveness, and potential assistance with interest payments.

Getting Started with Repayment

If you are one of the 8.8 million borrowers who haven’t made a payment yet, now is the time to get started.

I’d suggest starting by getting a quick estimate of your monthly SAVE bill.

If SAVE looks like it is going to be an affordable option, use studentaid.gov to apply for the new plan.

Calls to servicers to get questions answered and payments set up may still be necessary. It is frustrating but unavoidable.

Doing your homework and researching your options before calling your servicer increases the odds of getting things resolved in a single call.

The post Why 40% of Federal Borrowers Missed Their October Payments appeared first on The Student Loan Sherpa.

Things have gotten so bad that the federal government took the unprecedented step of withholding payments to MOHELA.

The Department of Education recognizing the issue, and taking steps to fix things is a step forward. However, it is too little too late for the many borrowers who are overwhelmed and frustrated.

In light of these challenging circumstances, borrowers should consider taking additional measures to safeguard their interests and avoid unnecessary spending.

Call MOHELA First Thing in the Morning

Contacting MOHELA’s customer service first thing in the morning, when representatives are just starting their shift, may prove advantageous.

At the beginning of the day, customer service agents are less likely to be fatigued or frustrated, increasing the likelihood of receiving more focused and helpful assistance. Furthermore, calling during the early hours may result in shorter hold times, allowing borrowers to address their concerns more efficiently.

Borrowers with Direct Loans or federally-held FFEL loans should call MOHELA at (888)866-4352. The call center opens for business at 7 AM Eastern, Monday through Friday. Weekend hours are not offered.

Keep Detailed Records of Everything

Maintaining meticulous records of interactions with MOHELA is crucial for borrowers navigating the current mess. Taking thorough notes during phone conversations is a prudent practice, capturing key details such as the date, time, names of representatives spoken to, and a summary of the discussion. These notes can serve as valuable reference points in case of future discrepancies.

In addition to documenting phone conversations, borrowers should make copies of all documents submitted to MOHELA. This includes any forms or applications, such as an IDR application or PSLF employer certification. Creating a comprehensive file of these documents provides proof of a borrower’s actions if things go missing in the future.

The devil is often in the details, and the more comprehensive these records are, the better.

Email MOHELA When Possible

Many borrowers need to have a discussion, or they need an instant answer. For these borrowers, calls are often unavoidable.

Additionally, MOHELA’s track record of responding to email communications at this time is spotty.

However, when possible, an email is preferable. Going this route ensures that borrowers have proof of exactly what they were told.

MOHELA doesn’t make it easy to send an email, but it is possible.

On MOHELA’s Contact Us page, there are a couple of dropdown menus in the middle column. Borrowers must pick a state and a topic. For some topics, the option to send a secure message appears in the third column.

Sherpa Tip: Be creative about the topic that you select.

“Repayment Options” doesn’t allow users to send a secure message, but “Payments or Bills” allows it. Likewise, if you select “Forgiveness and Discharge Options” a secure message is unavailable, but there is one for “Public Service Loan Forgiveness.”

The Value of Detailed Records of MOHELA Communications

Maintaining detailed records becomes especially crucial when correcting mistakes made by loan servicers like MOHELA.

The Department of Education recently declared that borrowers will be charged 0% interest and receive credit toward programs such as Public Service Loan Forgiveness and income-driven repayment forgiveness when errors are identified. However, without clear documentation, proving the existence of a mistake becomes challenging, potentially hindering borrowers from obtaining the benefits they are entitled to.

In cases where discrepancies arise, having meticulous records of interactions, submitted documents, and any written communication becomes a powerful tool. These records prove the borrower’s efforts and can significantly streamline the resolution process.

Without any proof, things become much more difficult.

Consider Filing a Complaint with the Consumer Financial Protection Bureau

Filing a complaint with the Consumer Financial Protection Bureau (CFPB) serves as a powerful tool for borrowers to protect themselves from servicer mistakes. CFPB complaints carry significant weight, as both servicers like MOHELA and the Department of Education take them seriously. This formalized process ensures that borrowers’ concerns are thoroughly examined, providing an additional layer of accountability.

One notable advantage of submitting a complaint to the CFPB is the potential for immediate relief. Typically, CFPB complaints trigger a review of the borrower’s account by the loan servicer, which can prompt a correction.

Additionally, the cumulative impact of individual complaints also makes a big difference. These complaints help the Department of Education identify major issues and can lead to policy changes.

In short, by filing a CFPB complaint, you help yourself and other borrowers.

Doing Your Homework is Critical

At a time when loan servicers, including MOHELA, are prone to making mistakes, it becomes essential for borrowers to protect themselves.

Before calling MOHELA, borrowers should research the questions or concerns they have. Utilizing online resources and tools, such as estimating payments on SAVE, can provide valuable insights. This proactive approach makes it much easier to identify servicer mistakes if they happen.

Finally, when you are given information, verifying things is always a good idea.

Final Tip: Kindness Matters

Borrowers have every reason to be upset with MOHELA.

However, yelling at the customer service representatives won’t help. It will probably make things worse.

The human being on the other end of the phone isn’t out to get you and isn’t trying to make your life difficult. Many customer service representatives are underpaid, undertrained, and deal with abuse from both their bosses and borrowers. They too, are victims of a broken system.

If you try collaborating with the person you are talking to, the outcome will usually be much better.

The post How to Protect Yourself from MOHELA Mistakes as Restart Gets Ugly appeared first on The Student Loan Sherpa.

Predictably, hold times at Mohela, Nelnet, and other services have been long. Many borrowers are reporting waits of multiple hours.

The big disappointment has been the mistakes and bad guidance that some borrowers have received. The Department of Education makes it clear that borrowers shouldn’t have to pay for help to manage their student loans, but the companies tasked with helping borrowers haven’t done their job.

What went wrong?

Can it be fixed?

And who is to blame?

Mohela, Nelnet, Aidvantage, and Edfinancial All Deserve Some Blame

In the winter of 2020, the servicer trade organization warned that they would receive more calls in the first month of repayment than what they normally receive in a year.

Making matters worse, these companies all cut staff during the pandemic.

However, they had plenty of notice on the restart date. Even though the date had been a moving target, this time around, there was legislation spelling out when the restart would happen.

To help servicers, the Department of Education started charging interest an entire month before payments were due. This move should have spread out demand for assistance over the course of a couple of months.

Sadly, servicers were still not ready. Long hold times are a clear sign that staffing levels are too low. The processing mistakes and inaccurate guidance indicate that the staff wasn’t properly trained.

Congress Dropped the Ball

Our student loan system is frustratingly complicated at times. Between Perkins Loans, FFEL Loans, Parent PLUS Loans, Spousal Loans, and Direct Loans, we have a long list of loan types, each with different eligibility rules.

Further complicating things is the long list of repayment plans. Each new repayment plan has helped make things more affordable for borrowers, but each weighs down the system. More options mean more complications.

Congress could create one repayment plan and make all loans eligible. Congress could automate the entire process. Congress could offer debt relief. Instead, Congress hasn’t made any comprehensive reforms in years, and borrowers are stuck in this mess.

The Department of Education’s Big Mistake

Over the past few years, the Department of Education has made numerous efforts to help borrowers and correct past issues. For example, the Limited Waiver on PSLF was created to help borrowers who received inaccurate guidance about the Public Service Loan Forgiveness Program.

Unfortunately, the Department of Education repeatedly makes the same fundamental servicer error.

Contracts with loan servicers specify minimum standards of performance. There is almost no incentive for Mohela, Nelnet, or Aidvantage to innovate or improve things. The less money they spend meeting that minimum standard, the more profit they generate.

A Simple Fix to Servicing Nightmares

There should be more servicers to choose from, and borrowers should be able to pick their servicers.

Currently, borrowers are assigned to a servicer and have almost no control over who services their loans.

If borrowers could move to a different servicer, servicers would have an incentive to keep hold times low and to be helpful. Servicers would have to compete to keep borrowers on their books. Servicers would have an incentive to innovate and to provide excellent service.

This change wouldn’t be very expensive, but it could dramatically change the quality of service that borrowers receive.

Two Parties Who Don’t Deserve Any Blame: Borrowers and Customer Service Representatives

I’m intentionally putting borrowers and low-level servicer employees in the same bucket.

Both groups are victims of the same broken system.

From the borrower’s perspective, the hours-long hold times are a recipe for anger and frustration. By the time they talk to an actual human being, they get rushed and, at times, get inaccurate information. It becomes a challenge to keep your composure.

From the customer service representative’s perspective, things are likewise ugly. All day long, you are tasked with helping angry and frustrated borrowers. They ask questions you haven’t been trained to answer and blame you for things you have no control over. Worse yet, it never stops. There is one angry caller after another.

In many ways, we have been pitted against each other.

My advice to both groups is simple. Your anger and frustration are justified, but please direct it to the parties who actually deserve the blame.

The post Who is to Blame for the Servicing Mess at Mohela, Nelnet, and Others? appeared first on The Student Loan Sherpa.

The long hold times we are facing haven’t been a surprise, but errors made by servicers have added a new and complicated wrinkle to the restart.

Sherpa Thought: A big thanks to all of the readers who have reached out to share the challenges you’ve faced.

I’ve collected the most commonly reported issues in this article. Hopefully, it will help other borrowers navigate this difficult time.

Incorrect Recertification Deadlines

Many borrowers are reporting that their servicer is requiring new IDR income certifications. This shouldn’t be happening.

To be clear, borrowers may choose to submit income verification for IDR enrollment. For example, if you are on PAYE and want to sign up for SAVE, income verification will be a necessary step.

That said, the Department of Education policy is that borrowers are not required to submit new income information if they wish to resume payments on their old repayment plan. For borrowers who make more money than what they did in 2020, waiting to recertify could mean considerable savings.

If you don’t want to change plans, the earliest you will have to recertify your income is March 1, 2024.

Recalculating IDR Payments for the SAVE Plan but Excluding Spousal Loans

As the REPAYE plan gets replaced with SAVE, borrowers who were on REPAYE before the pause should receive updated payment amounts.

This revised payment amount should always be lower.

If the servicer is using the previously certified income and the newer, more generous SAVE formula, payment amounts should decrease.

Sadly, some former REPAYE borrowers are getting new larger payment notices. This issue appears to be happening to married borrowers with spouses who also have federal student loans.

If spousal loans are mistakenly excluded, the married borrower could have a considerably larger monthly bill.

Inaccurate Forgiveness Timelines

Many borrowers are getting widely inaccurate information about when their loans will qualify for IDR forgiveness.

I’ve never been shy about criticizing federal loan servicers, but they are not to blame when it comes to forgiveness timeline mistakes.

At some point next year, borrower progress toward forgiveness will get updated. This IDR Count Update will award borrowers credit for periods on non-IDR repayment plans and some deferments and forbearances.

It will be at least several months before servicers get updated numbers.

For borrowers, extra work will be required to determine their progress toward IDR forgiveness.

Sherpa Tip: Don’t expect help from the Loan Simulator. Even though it reports expected forgiveness timelines, right now, the estimated time remaining projections are only reliable for borrowers starting repayment.

It appears that the Department of Education will overhaul this aspect of the tool once the IDR count update is completed.

Correcting Servicer Errors

The best approach for fixing a servicer error will depend on the type of servicer error.

If they provide bad advice, there isn’t much for the borrower to do. It’s not your job to educate the representatives. At most, you can file a complaint about the servicer. Right now, the most important thing is to verify any information you receive.

If they miscalculated your monthly payment or they want an immediate recertification, more steps are required.

In many cases, fixing an error is easier if you can identify how the mistake was made. For example, if you were on REPAYE, but your SAVE payment is larger, explain that they may have calculated your monthly payment without including your spouse’s loan information. Ask them to rerun the numbers.

If they want an immediate income recertification, pull up the Department of Education article that says that March 1, 2024, is the earliest deadline. Ask why this particular rule doesn’t apply to you.

Sadly, playing nice with the loan servicer isn’t always enough. Sometimes, filing a complaint is the best way to get things resolved.

Filing a Servicer Complaint

The best way to draw attention to a loan servicing issue is to file a complaint with the Consumer Financial Protection Bureau.

These complaints help the CFPB and the Department of Education identify widespread servicing issues. Additionally, they trigger a higher-level review of each individual complaint raised.

The CFPB complaint is often the fastest and most efficient way of correcting a servicer’s mistake.

Tips for Dealing with Servicers

Call waiting times are brutal. The longer the wait, the more frustrating the experience.

It is tempting to take out this frustration on the representative. After all, they get paid to help you, and in many cases, they fall short.

Unfortunately, the people working in loan servicer call centers are often underpaid, overworked, and insufficiently trained.

Rather than getting angry, be a breath of fresh air. Be patient and understanding. Be kind.

Whether or not you get help with your student loan issue may come down to the motivation of the call center representative. Be the type of person they want to help.

The post Common Student Loan Servicer Mistakes: Frequent Errors Complicate Restart appeared first on The Student Loan Sherpa.

One common source of confusion for borrowers is that Mohela services both federal and private student loans. For example, Mohela prominently displays information about loan forgiveness and income-driven repayment plans. However, it’s important to note that these options are exclusively available to those with federal loans.

Fortunately for borrowers, identifying whether your loans with Mohela are federal or private is straightforward. Additionally, there are resources available to assist in the repayment of both types of loans.

How do I know if my Mohela loans are federal?

The Department of Education keeps detailed records on all federal student loans.

Borrowers can access these records at studentaid.gov. If your Mohela loans are listed, they are federal. If the loans do not appear, they are private.

A phone call to Mohela can also clarify any confusion about loan status. The Mohela contact information is available here.

Digging Deeper: If your loans are more than ten years old, you may have federal loans that are privately or commercially held.

Loans that are federal but not federally held, such as some FFELP loans, may have limited repayment and forgiveness options.

Repayment Options and Forgiveness for Mohela Federal Loans

If you have federal student loans, the rules and options for the loan are the same, regardless of who services the loans.

Mohela should assist borrowers in determining program eligibility and enrollment. However, borrowers are ultimately responsible for decisions made. If a borrower makes a mistake because the loan servicer provided bad advice or inaccurate information, there usually isn’t a remedy for the borrower.

The following guides may be helpful for borrowers trying to figure out what to do with their federal loans:

Sherpa Tip: Think of Mohela as a helpful resource instead of the final authority on student loan questions.

In many cases, loan servicers are an excellent source of information. However, many borrowers may regret not double-checking the information they receive.

Options and Strategy for Mohela Private Loans

Private loans managed by Mohela don’t follow a standard set of rules.

The specific terms and conditions of your private loan are outlined in your original student loan agreement. Mohela’s job is to collect payments and answer questions about the loan.

If you’re facing difficulties with your private loan, reaching out to Mohela could lead to possibilities like loan modification or hardship assistance. While assistance from lenders isn’t always a sure thing, many are open to receiving some payment rather than none at all.

For those seeking to lower their monthly payments or reduce interest rates, refinancing private loans might be a viable solution. This option typically requires a good credit score and stable income, though having a qualified cosigner can also be beneficial.

Contacting Mohela Customer Service

Borrowers have several options for contacting Mohela.

By Phone:

888.866.4352 (Toll Free)
636.532.0600 (International)

By Mail:

MOHELA
633 Spirit Drive
Chesterfield, MO 63005-1243

Finally, borrowers can receive assistance by sending a secure message through the Mohela website.

The post Are Mohela Loans Federal or Private? appeared first on The Student Loan Sherpa.

This situation is even more frustrating when you know the servicer can do what you request, but you can’t find the right words or talk to the right person.

If your servicer won’t help, don’t lose hope. Borrowers have resources to go to get the help they need.

When Servicers Don’t Help: An Example

Last week, I heard from a reader named Kyle who had a simple issue.

Kyle wanted a refund on payments he made during the COVID payment and interest freeze. It is the Department of Education’s policy to refund these extra payments. For most borrowers, it is a simple phone call, and the servicer issues the refund.

Kyle’s situation is a bit more complicated because his loans were transferred from MOHELA to FedLoan Servicing. MOHELA says FedLoan Servicing should handle the refund. Meanwhile, FedLoan Servicing claims it is MOHELA’s responsibility.

If you are in a situation like Kyle’s, the following provides some steps you can take to get the help you need.

Loan Servicer Ombudsman

An ombudsman is someone who investigates and helps resolve complaints.

Each of the federal student loan servicers has an ombudsman.

If the standard customer service representatives can’t help, in many cases, an ombudsman might be able to. Servicers don’t do a very good job publicizing ombudsman contact information. However, this is one phone call or email that can make a huge difference.

The Department of Education

All federal student loan servicers report to the Department of Education.

If your servicer doesn’t do its job, filing a complaint with the Department of Education may help.

The Department of Education has an online portal for borrowers to submit and track complaints. The Federal Student Aid Ombudsman Group handles these disputes. Borrowers can also call the FSA Ombudsman at 1-877-557-2575.

Getting Creative: Sometimes, a creative solution is the best solution. Try to come up with an idea unique to your circumstances.

For example, in Kyle’s situation, I suggested he arrange a 3-way call between MOHELA and FedLoan Servicing. If neither takes responsibility, having both on the line might force them to resolve the issue together.

File a Complaint with the Consumer Financial Protection Bureau

The CFPB is the federal agency responsible for protecting consumers against false or deceptive financial products and services.

Notably, the CFPB filed a massive lawsuit against federal student loan servicer Navient for failing to assist borrowers properly. This lawsuit could not have happened without borrowers coming forward to share their experiences and issues.

Borrowers can submit a complaint to the CFPB here. Additionally, we have previously published a guide to filing a CFPB complaint.

Contacting Elected Officials and Members of Congress

Americans hold a very low opinion of the United States Congress. This is, in part, because members of Congress often have a reputation for doing very little once elected.

Consequently, many borrowers are surprised to learn that Congressional offices can often be very helpful in these situations.

Constituent services provided by members of the House of Representatives and Senate can help student loan borrowers in a significant way. These Congressional staffers are especially adept at helping voters navigate complicated government red tape. Additionally, an email from the office of a member of Congress can make a huge difference.

When your elected official gets involved, the red tape may disappear and processing times are often significantly reduced.

Final Thought: The Human Element

The call center representatives have demanding and stressful jobs. They deal with angry and frustrated borrowers all day. They are often underpaid and poorly trained.

These interactions can be frustrating and tedious.

Yelling won’t help.

If you talk to a representative who doesn’t seem able or willing to help, hang up and call again. If you are kind and patient with the human being on the other end of the line, they might want to help you. Finding an ally could be the lucky break you need.

The post Help! My Federal Loan Servicer Won’t Do Its Job appeared first on The Student Loan Sherpa.