FedLoan Servicing, commonly called myfedloan, has already announced they will not be renewing their contract with the Department of Education.

At present, borrowers don’t know who their new servicer will be or when the new servicer will be assigned.

This uncertainty opens the doors for scammers. Some scammers may claim to be the new student loan servicer, while others charge borrowers for a servicer transfer.

The good news for borrowers is that there are several ways to identify the scams and tools to verify that you are working with a legitimate federal loan servicer.

Loan Servicer Transfer Scams Often Include a Transfer Fee

Federal borrowers with loans serviced by myfedloan will get assigned a new servicer. The entire process is free of charge.

If an individual or company charges a fee to change servicers, it is almost certainly a scam.

Additionally, there isn’t a legitimate service that “helps” with servicer changes. The process isn’t always smooth, but paying someone to help is asking for trouble.

If you think you may have fallen for this scam, follow these steps to report the fraud, protect your assets, and get your money back.

How Loan Servicer Changes Work

The Department of Education has a system in place for loan servicer transfers.

Before any servicer changes happen, borrowers will receive a letter and/or an email from the Department of Education about the change.

For example, when the Department of Education announced the FedLoan Servicing change, the following email went out to borrowers:

Once the transfer is complete, borrowers will receive notification about the new loan servicer and contact information.

At this point in the process, borrowers simply need to verify that the new servicer is legit.

Verifying Loan Servicer Legitimacy

Given the number of scams, it might scare borrowers to work with a new company or provide personal information.

Fortunately, the Department of Education keeps a detailed database of all federal loans, including servicer names and contact information.

Unfortunately, it takes a few steps to find the database within the Department of Education site.

If you have any concerns about the new company that claims to be your loan servicer, checking the federal database should address the problem.

Be Patient: One of the downsides to the federal database is that it is only updated once per week.

If you don’t find your servicer in the Department of Education records, it is possible that the update hasn’t happened yet. Check back in seven days to verify.

Avoiding the FedLoan Servicing Transfer Scam

Like most student loan scams, the key is identifying the red flags.

If somebody tries to charge for a free service, it is a scam.

Loan servicer transfers are a headache, but they are a headache provided free of charge by the Department of Education.

The post Scam Alert: Shady MyFedLoan Servicing Transfers appeared first on The Student Loan Sherpa.

The decision for MyFedLoan to exit federal student loan servicing comes at a terrible time for borrowers.

The repayment restart was already looking like a mess for borrowers, but this new wrinkle is more bad news for millions of borrowers. With FedLoan Servicing planning their exit, it is unlikely they will make investments necessary to handle the influx of borrowers in repayment. The danger to borrowers is long wait times and potentially undertrained representatives.

If MyFedLoan services your loans, you should expect a headache or two dealing with the repayment restart and eventual exit of PHEAA. Fortunately, there are a few steps that borrowers can take right now to limit the damage.

Preventing the Transfer from MyFedLoan and Relief for Borrowers

When a student loan servicer or lender changes, the first question from many borrowers is, how do I stop this change?

Sadly, there isn’t any way to prevent the change. Worse yet, there isn’t any way for borrowers to benefit from this process. The federal government is allowed to change servicers, and borrowers have no say in the process.

The best we can hope for is a smooth transition.

Planning for the Repayment Restart and PHEAA Exit

Getting answers from your student loan servicer was already going to be difficult. Many servicers have been vocal about the fact that they are not yet ready for payments to restart and lack sufficient staff with proper training.

If your servicer is exiting the loan servicer business in a few months, it is a safe bet that they will be cutting costs wherever possible. For MyFedLoan borrowers, this means long wait times and minimal support.

If you have questions about repayment plans, forgiveness eligibility, or anything else, now is the time to ask. Once the floodgates open in January 2022, it will be tough to get even the most basic question answered.

Certify Public Service Loan Forgiveness Progress

One of the noteworthy aspects of MyFedLoan is that they service all borrowers who are pursuing Public Service Loan Forgiveness.

Anyone serious about PSLF knows that many issues have made it challenging to get forgiveness.

Before the servicer change, it is a good idea to submit an updated Employer Certification Form (ECF), especially if it has been a while. Borrowers unsure of what they are doing can use the Department of Education’s PSLF Help Tool to get the necessary documents in order.

Documenting progress is a great way to ensure that you qualify for PSLF. With MyFedLoan exiting the servicer business, it may also help ensure that all eligible time gets counted.

Sherpa Tip: Public service work done during the federal payment suspension and interest freeze still counts towards PSLF. Even if you didn’t make any payments during the Covid-19 relief, those months could still count towards the required 120 payments.

Delete Auto-Payments and Auto-Debits

Many borrowers have their bank send a check each month to their student loan servicer. If MyFedLoan is no longer servicing your loans, you will want to make sure you stop sending them a check.

Likewise, if you authorized MyFedLoan to withdraw money from your account each month, it is a good idea to remove that authorization. In theory, there shouldn’t be an issue, but the best way to prevent an accidental withdrawal is to end any auto-debits.

Download and Save All of Your Records

Don’t assume that MyFedLoan will transfer accurate records of previous payments.

Years from now, you may apply for student loan forgiveness, and it might be necessary to provide proof of payments made to MyFedLoan.

Downloading all of your statements and a payment history takes very little time. Having these records in the future could be very valuable.

Update Your Contact Information

Finally, borrowers with MyFedLoan should update their contact information.

It might seem like you are doing the lender a favor by doing this, but it is the best practice. If a lender mails a letter to your old address and you miss a bill, you risk losing progress towards forgiveness, late fees, and negative credit reporting.

Ideally, the new servicer will reach out via phone, email, and regular mail. Realistically, this probably won’t happen. If you have an outdated address on file, you risk missing crucial information.

The post MyFedLoan Exits Student Loan Servicing: Next Steps for Borrowers appeared first on The Student Loan Sherpa.

This month I logged on and saw something disturbing, I was delinquent.

After confirming that there were sufficient funds in my bank account, I sent MyFedLoan an email. I was concerned about preventing this issue from happening again and worried it could negatively impact my credit score even though it was 100% not at fault.

The First Email to MyFedLoan

I sent the following email when I noted the issue:

My account is set up to direct debit the monthly payment each month. It has been set up this way for at least six months. When I logged in today it indicated that my account was 1 day past due and delinquent. I have several questions:

1) Why has the money not been pulled from my bank account for this month?

2) Will this trigger a negative credit reporting that will need to be corrected?

3) Do I need to change the auto-debit settings?

The First MyFedLoan Response

Three days later, I received the following response from MyFedLoan:

Your payment was received on December 10, 2017, which was a Sunday. Unfortunately, payments can’t be processed on weekends or holidays. If your due date falls on a weekend or holiday, we will process your payment the following business day. Though your payment may take 2-3 business days to go through, it will always post effective for your due date. Please note that your account will reflect as delinquent until the payment has been posted.  We report monthly to each nationwide consumer reporting agency, so a temporary delinquency of only a few days will not negatively affect your credit report.

I was relieved to learn that there would not be any negative consequences to this “delinquency” but still concerned over what I deem to be a flaw in their system. At no point should a borrower who is enrolled in auto-debit and making payments be told they are delinquent. If there is even a chance that this reports in a delinquency report, it is an issue.

The Second Email to MyFedLoan

With my concerns now shifted to others who might get an erroneously reported delinquency just because their auto-debit date fell on a Sunday, I asked the following:

When you say you report monthly, does that mean all of your credit reporting for all customers happens on the same day? My concern is that if the day of the month you report happens to be the 11th, then my report might indicate that I was delinquent. Is this possible?

The Second MyFedLoan Response

MyFedLoan responded by stating:

We report every account on the last day of every month. You will not be reported as delinquent.

Lessons from my “Deliquency”

Emails have value – This interaction is a good example of why I encourage borrowers to communicate with their lenders via email. If I look at my credit report next month and I see a delinquency reported by MyFedLoan, I’ll be in an excellent position to dispute the issue. I’ll have an email chain to show the credit agency and I’ll have proof to MyFedLoan that any errors reported were mistakes that need to be corrected.

Make MyFedLoan happy by the end of the month – The policy to report the status of all customers on the last day of the month is valuable information to have. If you have an issue with your account status early in the month, it means there is plenty of time to get things resolved. If the calendar says it is the 28th and an issue arises, you need to contact MyFedLoan as soon as possible.

MyFedLoan is sloppy – Whoever programmed the MyFedLoan system should not have set up the account to read delinquent on the days following auto-debits set for a Sunday. Further, once this issue was identified, their system should have been fixed. If I log on the following Monday, it would be far more appropriate for the account to read “payment processing”. This issue wasted my time and the time of MyFedLoan employees. Every time they get a call or an email about this issue more time is wasted.

The post MyFedLoan Mistakenly Says I’m Delinquent appeared first on The Student Loan Sherpa.

In addition to being one of the biggest federal loan servicers, they have a reputation for being one of the worst. Unfortunately, this makes getting answers to some of the most basic questions difficult.

One of the more challenging issues that a borrower may face is finding a way to secure a lower interest rate on their federal loans.

Getting Lower Interest Rates

If your loan is with FedLoan Servicing, it means it is a federal government loan. Federal government loans are usually the recommended loans for borrowers because they come with great perks like income-driven repayment plans and Public Service Student Loan Forgiveness.

The downside to Federal Loans is that the rates are set by Congress. This means that regardless of your financial situation, FedLoan Servicing cannot offer you lower interest rates. The best you will be able to do is to sign up for automatic withdrawals for your monthly payments to get a .25% interest rate reduction. This reduction is better than nothing, but it is so slight that the difference will only be noticed on loans with very high balances. The good news is that there are a couple of methods to make a real difference in interest rates.

Method #1: Have Someone other than FedLoan Servicing lower the interest rate

Just because you cannot log on to myfedloan and get a lower rate doesn’t mean that it is impossible to get a lower rate on your loans. Private lenders like SoFi and LendKey offer student loan consolidation and refinancing services.

This student loan move can be a great idea because it lowers your interest rates substantially and gets the loans paid off faster. However, it is risky, because once you go with a private lender, you lose out on all the perks that go with a federal loan. Making things even more complicated is the fact that once your loan is private, it cannot ever go back to being a federal loan. With no way to undo this process, borrowers must understand the consequences of giving up federal benefits.

However, for borrowers that are certain they will be paying their loan off in full and unlikely to take advantage of the federal programs, private refinancing has a huge advantage. The idea behind it is that someone with a degree and a job is much less of a credit risk than someone who is still in school. Less risk means lower interest rates. Because competition for creditworthy borrowers is fierce, in addition to lower interest rates, SoFi offers new customers $150, while lenders like Splash will provide a bonus of up to $500.

Method #2: Take Advantage of Income-Driven Plans

Even if you don’t have the credit score or income for a private consolidation, there are still options within Fedloan Servicing.

Most federal student loan borrowers can get lower monthly payments by signing up for an income-driven repayment plan. Even if you can afford the monthly payments on your current payment plan, getting lower payments allows you to essentially lower your interest rate each month.

Suppose you have two $10,000 student loans. Loan A has an interest rate of 7%, and Loan B has an interest rate of 4%. The monthly payment on both loans is $250, bringing your total monthly payment to $500. This is a payment you can afford. Rather than continuing to pay $250 towards each loan, suppose you sign up for an income-driven plan, such as IBR or PAYE. Under the new plan, your payment could be lowered to a total of $100 for both loans. With the new payment plan, you have freed up $400 per month. That extra $400 per month can now be applied to the high-interest rate loan.

Using the strategy of lower payments and directing the extra money towards the high-interest loan, you spend the same amount each month, but you will pay off your student loans faster because you will spend less on interest.

Technically, you are not getting a lower interest rate, but in reality, you are spending less on interest.

Bottom Line

Fedloan Servicing has no authority to reduce your interest rate beyond a slight reduction for auto-payments.

However, if you get creative, you can still save money each month on student loan interest.

The post Getting a Lower Interest Rate from FedLoan Servicing (MyFedLoan) appeared first on The Student Loan Sherpa.