If you choose to take out a student loan to help pay for your education, it’s important to know up front who your loan servicer will be. Performing research on various servicers is important, especially since some of them have been exposed and are under legal action for predatory lending practices and even fraud.
Many students are in default on their loans, and in some cases, that’s a direct result of miscommunication or even poor practices on the part of the servicer. So understanding your particular servicer’s policies and reading reviews from previous borrowers when choosing where you’ll take out your student loans is very important.
FedLoan is a well-known company that was specifically created to handle servicing for federal student loans through the Department of Education, and is owned by the Pennsylvania Higher Education Assistance Agency. Once you take out a federal loan the obligation is sometimes purchased by the federal government who contracts with FedLoan and other companies for servicing. That means your payments go to FedLoan instead of going directly to the government. You would also call FedLoan with questions on repayment or ongoing maintenance of your account, such as address or income changes.
The company offers a .25 percent interest rate reduction for those who set up direct debit payments, in which FedLoan debits your bank account monthly on a prearranged day to make your loan payment. They also offer income-driven repayment plans and other options for repaying your student loans. Their website is split into three main sections geared toward the phase you’re in. Whether you’re in school and making repayment plans, in your grace period and setting up your repayment schedule, or already making payments, FedLoan’s FAQ offers options and information.
Problems at FedLoan
While all of this sounds professional and well-done, FedLoan appears to have a dark side as well. Student borrowers seem to espouse a special hatred for FedLoan’s policies and practices; a Facebook page created just for FedLoan complaints shows that out of 138 borrower reviews, 127 of them were one star. The reviews detail horror story after horror story regarding payment errors, wrongly charged fees, and much more. Other borrowers complain that when they called the company to work out an error or ask for repayment options, FedLoan representatives were rude, unhelpful, and even verbally abusive.
Unfortunately, this seems to be normal for FedLoan borrowers. Robert Farrington, founder of The College Investor, has detailed his own experiences with FedLoan, pointing out that he had one payment never debited, another one took two weeks, and eventually a FedLoan representative and supervisor admitted that there are inherent and ongoing problems with the company’s payment systems.
The Better Business Bureau has also received complaints about FedLoan. Even though the company is ineligible for a BBB rating because of its industry, there are over 500 complaints filed by borrowers in the last 3 years alone.
Because federal student loans are reported on the three major credit bureaus, an error in your payments is a big problem. You could find yourself unable to pass a credit check – which often means you might have a problem getting a job, an apartment, or other financial services. That can put you on the road to financial ruin very quickly – and if it’s the servicer’s error, that can be a painful lesson.
Some websites advise that borrowers who have loans serviced by FedLoan should log in and check their accounts daily if necessary, admitting that “it’s not right” that the federal government’s largest loan servicer is so riddled with errors.Students don’t get to choose their loan servicer. Knowing what to expect and how to combat it, however, can mean the difference between a survivable experience and a life-ruining one.