FedLoan Servicing: What Happened and What You Need to Know

• FedLoan Servicing no longer manages federal student loans; it exited the market in December 2022 due to rising costs and complexity, which affected millions of borrowers.

• Your loans have been transferred to a new servicer, with most PSLF loans going to MOHELA, and other accounts moving to servicers like Edfinancial, Aidvantage, and Nelnet.

• To avoid any issues after the transfer, take a few proactive steps: update your contact information, confirm payment arrangements, and review your loan history with your new servicer.

FedLoan Servicing has officially stepped back from managing federal student loans. It leads to the transition of millions of borrower accounts to other servicers like MOHELA and Edfinancial.

This adjustment arises from the growing complexities and expenses linked to the federal loan system, together with new requirements from the U.S. Department of Education’s NextGen initiative, which seeks to improve support for borrowers.

Many of us might not yet be aware of this key update. But don’t worry—we won’t let you fall behind on any student loan matters. Keep reading for further details and actionable advice.

FedLoan Servicing officially left its role of managing federal student loans in December 2022, transferring accounts to servicers like MOHELA and Edfinancial.

This change, announced in 2021, came as FedLoan chose not to renew its contract with the U.S. Department of Education.

So, what does this mean for you?

In most cases, it’s just a new company managing your loans—your loan balance, interest rate, and payment terms remain the same. The goal was for this transition to be seamless for borrowers, though a few bumps in the road were expected as accounts moved from one servicer to another.

FedLoan decided to stop managing student loans because the federal loan system is becoming increasingly complex, and the costs associated with handling these services are going up.

Here’s a breakdown of the key reasons:

• Complex Loan System: The federal student loan system is the most complex consumer loan product in the world. It includes multiple repayment plans, options to delay payments, forgiveness programs, and loan consolidations, making it difficult to manage like a typical loan.

• Frequent Transfers: Transfers between loan servicers add to the confusion, often leading to lost records and errors, which complicates management.

• High-Stakes Programs: FedLoan was responsible for major programs like Public Service Loan Forgiveness (PSLF) and TEACH Grants, which require extra attention and accuracy. These demands became overwhelming.

• New Department Standards: The Department of Education introduced stricter standards to improve borrower support through its NextGen initiative. While these changes aim to benefit borrowers, they added more pressure on loan servicers.

In the end, FedLoan, managed by the Pennsylvania Higher Education Assistance Agency (PHEAA), left the federal loan servicing market to focus on its core work within Pennsylvania.

When FedLoan stopped servicing federal loans, its accounts—covering around 8.5 million student loan borrowers—were transferred to other servicers.

The main servicer that picked up FedLoan’s accounts was MOHELA, primarily because MOHELA handled the PSLF program at the time.

Eventually, the Department of Education took over PSLF management directly, centralizing everything through the Federal Student Aid (FSA) website.

In addition to MOHELA, other servicers that received FedLoan’s remaining portfolio included:

• Edfinancial

• Aidvantage (formerly Navient)

• Nelnet

For FedLoan borrowers, this change meant a new company was in charge of their loans, but their loan balances, interest rates, and repayment plans remained the same.

Related: Navient to MOHELA – What This Loan Transfer Really Means for You

If your student loans were transferred from FedLoan to a new loan servicer, here are a few steps to ensure everything is in order:

1. Update Your Contact Information: Confirm that your new servicer has your current address, phone number, and email. This helps avoid any missed notifications about your loans, especially if you’re enrolled in forgiveness programs or repayment plans that require regular updates.

2. Confirm Payment Details: Set up your monthly payments with your new servicer. If you were using auto-pay with FedLoan, you’d need to re-enroll in auto-pay with the new servicer. Monitor your statements for the first few payments to make sure everything processes correctly. This way, you can avoid any damage to your credit score from late payments.

3. Review Your Loan History: Log into your new account to review your loan balances with the current servicer, your payment history, and your progress toward any forgiveness programs like the Public Service Loan Forgiveness Program. Servicer transfers can sometimes lead to minor errors, so double-checking these details now can prevent future issues.

4. Save Your Records: Keep copies of past statements and payment confirmations from FedLoan. Having these records on hand can be invaluable if any discrepancies come up with your new servicer.

NextGen is a project by the Department of Education to simplify federal student loan servicing and improve the borrower experience. When FedLoan stepped out, it was part of a larger shift to consolidate servicers and set higher standards for customer support and transparency.

Now, under NextGen, borrowers can expect a few big changes:

1. One Unified Platform: Instead of going through several websites, borrowers now manage everything through a single platform on StudentAid.gov. Additionally, each servicer—like MOHELA, Edfinancial, Aidvantage, and Nelnet—has its own subdomain (e.g., mohela.studentaid.gov), with a standardized look across all servicer sites. This creates a consistent experience while still allowing you to log in to your servicer’s site separately from your main StudentAid.gov account.

2. Fewer Loan Servicers: The Department of Education has reduced the number of loan servicers, so most federal student loans will be managed by a select group of companies. This change should make interactions with servicers more consistent across the board.

3. Better Customer Service Standards: With NextGen, servicers are expected to meet higher standards for borrower support. This means more reliable information and help, especially for borrowers who may be struggling with repayment.

FedLoan Servicing exited the federal student loan market due to rising costs and increasing complexities in loan management, transferring millions of borrower accounts to new servicers. This adjustment made borrowers worried about what would happen to their loans.

Fortunately, borrowers will only adjust for the new servicer (MOHELA, Edfinancial, Aidvantage, or Nelnet) while their interest rates and payment plans remain the same.

If you are having problems with your student loans, our team of student loan lawyers can always lend a hand. Book a consultation or sign up for our newsletter to get the latest insights on student loans.

Related reading:

• AES Student Loans: Repayment Options, Forgiveness & Support

• EdFinancial Student Loans: Repayment Options, Forgiveness & Support

• MOHELA Student Loans: Repayment Options, Forgiveness & Support

• Navient Student Loans: Repayment Options, Forgiveness & Support

• Nelnet Student Loans: Repayment Options, Forgiveness & Support