FedLoan Forgiveness — All Your Questions, Answered

‍FedLoan is ending its contract with the Department of Education, but it is still processing Public Service Loan Forgiveness applications through 2022. Borrowers will keep their eligibility for forgiveness programs when their account switches to a new loan servicer.

Later this year, FedLoan Servicing will stop handling federal student loans, and borrowers will be moved to a new student loan servicer. Until then, it is still responsible for tracking your monthly payments and progress towards student loan forgiveness programs.

Ahead, learn how to get FedLoan forgiveness and how to protect your progress when your loans are moved to a new servicer.

FedLoan Servicing is responsible for reviewing borrowers’ eligibility for forgiveness programs as part of its contract with the Education Department. The most common pathways to relief for most borrowers are:

• Public Service Loan Forgiveness

• Income-Driven Repayment Plan Forgiveness

• Teacher Loan Forgiveness

Here’s how to qualify for each of those forgiveness options.

Public Service Loan Forgiveness eliminates the balances for full-time government and qualifying nonprofit employees with federal student loans. Eligible public service workers can have their remaining loan balance forgiven tax-free after making 10 years’ worth of payments.

Few borrowers initially qualified for PSLF. The program’s eligibility requirements were complicated, and federal student loan servicers failed to let borrowers know they had the wrong type of loans. Congress tried to fix some of those issues with the Temporary Expanded Public Service Loan Forgiveness Program. But TEPSLF didn’t fix the wrong loan type problem. It only helped borrowers get credit for payments made under different student loan repayment plans.

At the end of 2021, the Biden Administration took a hacksaw to the program and cut away the rules that allowed less than 1% of student loan borrowers to get rid of their debt. The new temporary PSLF Waiver expands the type of payments that count for relief. Now, payments on FFEL and Perkins Loans will retroactively count as PSLF payments if the loans are consolidated into a federal Direct Loan before Oct. 31, 2022. You can apply for a Direct Consolidation Loan for free at studentaid.gov.

Worried the changes still won’t help? Know this: As of Nov. 2021, over 30 thousand people have been awarded forgiveness under the new rules. You’re eligible for this limited waiver if you worked for a qualifying employer anytime after Oct. 1, 2007. To apply, submit the PSLF Employment Certification Form to FedLoan Servicing:

• Online: myfedloan.org

• Fax: 717-720-1628

• Mail: FedLoan Servicing, P.O. Box 69184, Harrisburg, PA 17106-9184

Learn More: How to Apply for Student Loan Forgiveness

Income-driven repayment plans help you avoid student loan default by ensuring you always have an affordable monthly payment — even if you become unemployed. These repayment plans carry another bonus: loan forgiveness.

Each income-driven repayment plan caps your payment amount at a portion of your discretionary income and stretches your repayment period. After you’ve made your last qualifying payment, the U.S. Department of Education writes off the remaining balance.

If you ever heard someone mention that there’s student loan forgiveness after 20 years, this is what they were talking about.

To get started, you’ll first need to submit an income-driven repayment plan request form to FedLoan. Once enrolled, you’ll need to update your income and family size annually before the student loan recertification deadline, which is 12 months from your first payment date.

Usually, the IRS considers the forgiven amount to be taxable income. But lawmakers passed the America Rescue Plan and made it tax-free from Dec. 2020 through the end of 2025. Unfortunately, most borrowers start qualifying for IDR forgiveness in the early 2030s. It’s not yet clear whether the waiver will be extended.

This forgiveness option doesn’t have an application. Instead, you automatically qualify once you’ve made your final student loan payment.

The IDR Plans

• Income-Based Repayment

• Income-Contingent Repayment

• Pay As You Earn

• Revised Pay As You Earn

Learn More: Student Loan Forgiveness for USPS Employees

Educators employed full-time in low-income public elementary or secondary schools are eligible for Teacher Loan Forgiveness after working for five consecutive years. This program forgives up to $17,500 in FFEL Stafford or Federal Direct Loans. Because of this low cap on forgiveness, most teachers with student loan debt will get more relief with the Public Service Loan Forgiveness Program.

Learn More: Do student loans ever go away?

The interest-free pause on federal student loans has been in effect since the onset of the coronavirus pandemic in March 2020. Not only has the forbearance paused the interest rate, but it’s also allowed FedLoan borrowers to receive qualifying payments towards PSLF and IDR forgiveness.

Even if President Joe Biden never approves $10,000 student loan forgiveness, you’ll still be 27 months closer to getting rid of your debt by the time payments restart on May 2, 2022.

Learn More: Student Loan Covid Relief

FedLoan Servicing will continue servicing loans into December 2022, after which its contract will expire. The Department of Education is in the process of moving borrowers from FedLoan Servicing to Missouri Higher Education Loan Authority, Aidvantage (formerly Navient), Edfinancial, and Nelnet. MOHELA will be the servicer for borrowers in the Public Service Loan Forgiveness Program and the TEACH Grant Program.

Before your loans are moved, take these two steps to protect your progress towards forgiveness:

• Step 1 – Download and save your payment history from your online account. You can also request FedLoan mail you a hard copy.

• Step 2 – Update your contact information with your current mailing address, phone number, and email address on your FedLoan account and on Federal Student Aid.

If you’ve had problems getting a straight answer from FedLoan about your eligiblity for forgiveness, you’re not alone. Unfortunately, they are one of the most complained about federal loan servicers. Over the years, I’ve helped borrowers just like you get accurate reporting of the credits they’ve earned towards PSLF and lower monthly payments.

Schedule a call with me to figure out if I can help you using my years of legal experience as a student loan lawyer.

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