- 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 switch, document current paperwork and keep track of your credit report.
FedLoan Servicing, a company that services federal student loans, will stop serving student loans when its current contract with the government ends. Borrowers enrolled in the Public Service Loan Forgivenss program who are currently serviced by the company will be transferred to MOHELA, another servicer, beginning in early July.
PSLF borrowers will get several notifications as their accounts are transferred, including one at least 15 days before the transfer happens and a welcome message from MOHELA after the transfer is done. If your loans are forgiven through PSLF during the transfer timeframe, your loans won’t be transferred.
The terms of your loan won’t change with a new servicer, and you’ll still qualify for the temporary payment pause and 0% interest benefits you were already receiving.
While there’s no action required ahead of the switch, you may want to take proactive steps to make sure none of your information gets lost in transition.
How should you prepare for the switch to a new servicer?
Document all of your current paperwork
One of the bigger problems you may encounter as your loans are handed over from one student loan servicer to the next is the lack of consistent record-keeping. You’ll want to make sure you can prove you made timely payments on your loans, so print or download your payment history from your lender’s website and store it in a safe place.
Keeping track of your payment history is particularly important for the PSLF program, as the time spent repaying these loans is crucial to eventually getting your student loans forgiven.
You should also retain copies of all correspondence between you and your loan servicer, including anything referencing your enrollment in PSLF. Save paper 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 the next, you may run into incorrect negative credit reporting, such as a missed payment that isn’t accurate. This can continue to hurt your
credit score
if you don’t catch it, so get a copy of your credit report and know where your account currently stands.
You can find your credit report for free on annualcreditreport.com from any of the three major credit bureaus weekly through December 31, 2022. While this report won’t give you your credit score, it will show you information about your credit and payment history, which lenders use to decide whether to give you a loan. Reviewing your credit report can help you know what you need to improve.
Reach out to your servicer for any additional questions
As the federal government transitions many borrowers to a new company, your servicer will likely have the most up-to-date information on where your loan is headed and can probably answer any questions.
About 550,000 borrowers may be closer to student loan forgiveness due to changes in the Public Service Loan Forgiveness Program the Department of Education made last year. A limited-time waiver through October 2022 will temporarily alter the rules of the PSLF program and make it easier for borrowers to qualify for forgiveness.
What are the recent changes to the PSLF program?
All repayment plans now count for PSLF
Until October 31, 2022, borrowers may receive credit for past payments that wouldn’t normally be eligible for PSLF. All you need is qualifying employment — it doesn’t matter the repayment plan, or if the payment was made in full or on time.
Parent PLUS Loans are not eligible for PSLF, even with this waiver, though Grad PLUS Loans are eligible.
Previously, you had to repay your loans under an Income-Driven Repayment Plan to be eligible for PSLF, but now past payments under any plan count.
Direct Loans and Direct Consolidation Loans count for PSLF
If you have Direct Loans or Direct Consolidation Loans, the government’s changes will apply to you. If you consolidate previously ineligible loans (like Perkins Loan or FFEL Loans) into Direct Consolidation Loans by October 31, 2022, these changes will also apply.
Non-payments ($0 towards your loans) on IDR plans during the student loan payment freeze due to the COVID-19 pandemic have counted towards the 120 monthly payments you need to make to qualify for PSLF. Under the waiver, the guidelines are a little murkier 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 count toward PSLF progress,” said Andrew Pentis, certified student loan counselor and higher education finance expert at Student Loan Hero.
The government didn’t explicitly confirm what happens in this scenario, so you should contact your federal loan servicer and confirm the new eligibility rules for PSLF, Pentis said. FFEL and Perkins Loans still aren’t eligible for the repayment pause. You’ll need to consolidate any non-Direct Loans to possibly become eligible for non-payments to count for PSLF — though it isn’t guaranteed.
The Department of Education has a handy table to review the differences between normal PSLF and the limited-time waiver:
Department of Education
What should you do next?
- Visit your Aid Summary page and verify your loan details. You’ll need to log into your account, then go to the loan breakdown section and see the types of loans you’ve taken out. You may need to verify your employment to determine if you’re eligible for PSLF.
- Submit your PSLF Certification and Application Form. You need to submit this form annually or when you change employers. You don’t have to fill out separate forms for previous years and the government recommends you use the PSLF help tool to assist you in filling it out. The government will use the information you input to let you know if you’re making qualifying PSLF payments.
- If you have Perkins or FFEL Loans, consolidate them into a Direct Consolidation Loan by October 31, 2022. You won’t get credit for payments under this waiver period if you consolidate after the deadline. After you’ve consolidated, submit your PLSF form to your loan servicer.
What is Public Service Loan Forgiveness?
Public Service Loan Forgiveness, or PSLF, forgives the debts of graduates employed in the public sector following at least 10 years of service and eligible payments. Your particular job isn’t important, only that you work for a public service employer. There’s no limit to the amount of money that can be forgiven.
Here are the basic requirements to qualify:
- Be an employee of the US federal, state, local, or tribal government, or an eligible not-for-profit organization (this includes military service)
- Work full-time for that employer
- Make 120 qualifying payments
You won’t be eligible for the program if you work for a labor union, partisan political organization, or for-profit company (which includes government contractors).
To learn more about the PSLF program and its recent changes, contact your loan servicer or read the Department of Education’s fact sheet.