How the Recent Change to the PSLF Loan Servicer Will Affect You
- Public service loan forgiveness borrowers will soon have their loans transferred to a new servicer.
- FedLoan Servicing is ending its contract with the government and MOHELA will now service the loans.
- To prepare for the change, document current documents and keep track of your credit report.
FedLoan Servicing, a company that handles federal student loans, will stop servicing student loans when its current contract with the government ends. Borrowers enrolled in the Public Service Loan Forgivenss program who are currently served by the company will transition to MOHELA, another servicer, beginning in early July.
PSLF borrowers will receive several notifications when their accounts are transferred, including one at least 15 days before the transfer and a welcome message from MOHELA once the transfer is complete. If your loans are canceled through PSLF during the transfer period, your loans will not be transferred.
Your loan terms won’t change with a new servicer, and you’ll still qualify for the temporary payment break and 0% interest benefits you were already receiving.
Although no action is required prior to the change, you may wish to take proactive steps to ensure that none of your information is lost during the transition.
How to prepare the transition to a new servicer?
Document all your current documents
One of the biggest problems you might encounter when your loans are transferred from one student loan servicer to another is the lack of consistent record keeping. You’ll want to make sure you can prove you’ve made timely payments on your loans, so print or download your payment history from your lender’s website and keep it somewhere safe.
Keeping track of your payment history is especially important for the PSLF program, as the time spent repaying these loans is crucial to eventually getting your student loans forgiven.
You should also keep copies of all correspondence between you and your loan servicer, including anything that refers to your PSLF registration. Save hard copies if possible and upload digital copies to the cloud.
Keep track of your credit report
When your loan is transferred from one servicer to another, you may encounter incorrect negative credit reports, such as a missed payment that is not accurate. It may continue to hurt your
if you don’t catch it, get a copy of your credit report and know where your account currently stands.
You can find your credit report for free at annualcreditreport.com from one of the three major credit bureaus every week until December 31, 2022. Although this report does not give you your credit score, it will show you information about your credit and payment history, which lenders use to decide whether or not to grant you a loan. Reviewing your credit report can help you know what you need to improve.
Contact your repairer for any additional questions
As the federal government moves many borrowers to a new company, your managing agent will likely have the most up-to-date information on your loan direction and will likely be able to answer any questions you may have.
About 550,000 borrowers could be closer to student loan forgiveness due to changes to the Civil Service Loan Forgiveness Scheme by the Department of Education last year. A time-limited waiver through October 2022 will temporarily change the rules of the PSLF program and make it easier for borrowers to qualify for a discount.
What are the recent developments in the PSLF program?
All repayment plans now count for PSLF
Until October 31, 2022, borrowers can receive credit for past payments that would not normally qualify for the PSLF. All you need is qualifying employment – regardless of repayment plan or whether payment was made in full or on time.
Parent PLUS loans are not eligible for PSLF, even with this waiver, although Grad PLUS loans are eligible.
Previously, you had to repay your loans under an income-driven repayment plan to qualify for PSLF, but now previous payments under any plan count.
Direct Loans and Direct Consolidation Loans count towards the PSLF
If you have direct loans or direct consolidation loans, the government changes will apply to you. If you consolidate previously ineligible loans (such as the Perkins loan or FFEL loans) into direct consolidation loans by October 31, 2022, these changes will also apply.
Non-payments ($0 for your loans) on IDR plans during the student loan payment freeze due to the COVID-19 pandemic have been counted towards the 120 monthly payments you must make to qualify for the PSLF. Under the waiver, the guidelines are a bit fuzzier on non-payments made on other payment plans.
“Logic tells us that if a direct loan borrower was and is eligible for the ongoing repayment pause, then yes, their non-payments on a standard repayment plan should be factored into PSLF progress,” said said Andrew Pentis, Certified Student Loan and Higher Education Advisor. financial expert at Student loan heroes.
The government hasn’t explicitly confirmed what happens in this scenario, so you should contact your federal loan officer and confirm the new PSLF eligibility rules, Pentis said. FFEL and Perkins loans are still not eligible for the repayment break. You will need to consolidate all non-direct loans to eventually become eligible for non-payments counted for the PSLF – although this is not guaranteed.
The Department of Education has a handy chart to review the differences between the normal PSLF and the time-limited waiver:
What should you do next?
- Visit your Help Summary Page and check your loan details. You will need to log in to your account and then go to the loan breakdown section and see the types of loans you have taken out. You may need to verify your employment to determine if you are eligible for the PSLF.
- Submit your PSLF certification and application form. You must submit this form each year or when you change employers. You do not have to complete separate forms for previous years and the government recommends that you use the PSLF Helper Tool to help you complete it. The government will use the information you enter to let you know if you are making eligible PSLF payments.
- If you have Perkins or FFEL loans, consolidate them into a direct consolidation loan by October 31, 2022. You will not get credit for payments under this waiver period if you consolidate after the deadline . After consolidating, submit your PLSF form to your loan servicer.
What is Public Service Debt Forgiveness?
Public Service Loan Forgiveness, or PSLF, forgives the debts of graduates employed in the public sector after at least 10 years of service and qualifying payments. Your particular job is not important, only that you work for a public service employer. There is no limit to the amount of money that can be forgiven.
Here are the basic requirements to qualify:
- Be an employee of the U.S. federal, state, local, or tribal government, or qualifying nonprofit organization (this includes military service)
- Work full-time for this employer
- Make 120 qualifying payments
You will not be eligible for the program if you work for a union, partisan political organization, or for-profit business (which includes government contractors).
To find out more about the PSLF program and its recent developments, contact your credit manager or read the Ministry of Education Fact Sheet.