How to Prepare for a Loan Servicer Change When You’re on a PSLF Plan

The infamous FedLoan Servicing, an arm of the Pennsylvania Higher Education Assistance Agency (PHEAA), notified the Department of Education that it no longer wished to service federal student loans beyond the expiration of its contract on December 2021.

On October 4, 2021, The Department of Education announced it would be transferring the customer service of federal student loan accounts from FedLoan Servicing to MOHELA, another member of ED’s federal loan servicer team.

Not to worry, though… We’ve developed this guide so you won’t have to worry about your PSLF payment count with these imminent servicer changes.

Since the program’s enactment in 2007, Fedloan has been responsible for the Public Service Loan Forgiveness (PSLF) program, a student loan forgiveness opportunity for borrowers working full-time in public service.

To be eligible for PSLF, you need to:

1. Have Direct Loans
2. Be on an income-driven repayment (IDR) plan
3. Work full-time for a qualified employer
4. Make 120 qualifying payments

The first year we could have ever seen someone achieve loan forgiveness was in 2017, so from that perspective, PSLF is a relatively new program.

PSLF has had problems

Editor's note: The PSLF Waiver expired on October 31, 2022. However, nearly all the benefits are still available through the IDR Waiver until June 30, 2024, for those currently working in qualifying not-for-profit or government jobs.

It’s not a secret that the program (and its servicer FedLoan) has had flaws. The Department of Education has set its sights on improving customer service and holding servicers more accountable for their performance in managing federal student loans.

Education Secretary Betsy DeVos believes this goal starts with firing the old major servicers and replacing them.

Your student loans aren’t being sold — Fedloan’s servicing contract with the Department of Education may just be expiring; therefore, your loans will be transferred to MOHELA, who will be deemed responsible for PSLF going forward.

Special considerations for those pursuing PSLF if Fedloan is fired

When your student loan servicer changes, there’s an unavoidable disruption to your payment routine. With a program as sensitive as PSLF, you want to minimize that disruption as much as possible.

A borrower’s PSLF payment count dictates their forgiveness timeline — once you make 120 qualifying monthly payments, your remaining student loan balance is forgiven, tax-free.

Download your payment history

Before the servicing work extension expires, save a PDF or take pictures on your phone of your payment history to date (and save to the cloud). Don’t stress too much about this proof because your National Student Loan Data System record will not be affected by a servicer change.

The NSLDS database, found at StudentAid.gov, is the Department of Ed’s primary record for student aid and provides a centralized, integrated view of your loan data that is tracked through the entire loan lifecycle, from aid approval through disbursement and repayment.

FedLoan reports all collected payments and loan information for each borrower to this centralized database to date as your servicer. Your saved payment history can be your backup if there is ever any discrepancy somehow.

Submit a new Employer Certification Form by the servicing extension expiration

Your NSLDS file updates in real-time as your FedLoan reports your payments, but your PSLF payment count does not get updated until you submit a new Employer Certification Form.

The ECF is retroactive, so FedLoan will determine how many qualifying payments you made during the period of qualifying employment within the dates provided in Section 3 of this form.

To be safe, go ahead and submit a new ECF form before the servicing work extension expires to get your PSLF payments counted to date before any possible student loan servicer change at the end of the year.

Be aware that reviews and appeals may be delayed

One concern I have is if your PSLF payment history is under review for whatever reason by FedLoan. FedLoan may not end up getting around to it if they’re being replaced. We’ll be watching out for information on how these reviews, the TEPSLF program, and FSA Ombudsman Group appeals may be affected by these student loan servicer changes.

Make sure you have a solid plan

The biggest inhibitor of successfully qualifying for loan forgiveness that I see is not doing your due diligence on your loan situation. If you have the right loan plan in place, you’re already a step ahead. If you’re not sure that you’re on track for PSLF, I encourage you to get a plan in place now.