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FedLoan Servicing Screwed me Over on My Public Service Loan Forgiveness

Written by Steve Rhode


Dear Steve,

I was misled by FedLoan Servicing regarding my loans under Income Based Repayment. I was told I was in the program for PSLF and worked for nearly 6 years at a non-profit. I left that non-profit to join another and was ready to have all debt forgiven in October 2017. Instead I was told that I have 4 years remaining as the time at the initial non-profit does not count because at some point the loans were consolidated into one, which I was told needed to occur but was never told it restarts the 10 year clock!

Are any class action suits occurring regarding the PSLF program? Or any Senators getting involved? Do I have any recourse for the PSLF program?



Dear Josh,

Hopefully you have some evidence of the bad advice and information FedLoan Servicing gave you to use to validate your claims.

To be eligible for Public Service Loan Forgiveness you had to have all your loans consolidated into a Direct Consolidation Loan. It makes the most sense to then elect to repay your loans with some graduated or income based repayment option otherwise on the standard payment plan you’d wind up repaying your consolidated loan in 120 payments anyway.

I’m no longer shocked that some servicer gave bad advice. But the problem runs deeper than that. The Department of Education outsourced the Public Service Loan Forgiveness servicing to FedLoan Servicing and has said in court documents the word of FedLoan Servicing is not to be relied upon. Read Public Service Loan Forgiveness Program Teters With Unmitigated Disaster.

The Department of Education says, “You may have received loans under other federal student loan programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program. Loans from these programs do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan. However, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated them don’t count.” – Source

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Your issues are somewhat aligned with the facts stated in the suit filed by the American Bar Association over the Public Service Loan Forgiveness program.

Even when student loan debtors have regularly submitted the Department of Education recommended Employment Certification Form on a regular basis to confirm their employment qualifies for forgiveness, the Department of Education says any determination by their contractor FedLoan Servicing, can’t be relied upon.

The government says, “The Department of Education (Department) has created a system by which individuals can obtain provisional guidance on whether their employers are qualifying employers for PSLF as they work towards making the 120 qualifying payments. Under this system, individuals file an Employment Certification Form (“ECF”), and FedLoan Servicing—which provides services for this program under a contract with the Department—responds with a notification regarding the employer’s status.” – Source

And the hidden gotcha in the program is making the 120 payments alone is apparently not sufficient, “Once a borrower has made 120 qualifying payments, she may submit an application for PSLF and an ECF to verify that she is employed with a qualifying public service organization. AR 179. The borrower must be employed by a qualifying public service organization at the time she submits the application for loan forgiveness and when the balance on the loan is forgiven.” And who knows how many years it will take to grant final approval after the forgiveness application is submitted.

So even if you made 120 qualifying payments you may still not be granted forgiveness if your employer is not considered to qualify when your forgiveness application is finally approved. And that fact was not lost on the American Bar Association who noted, “Significantly, the borrower’s prior ECF approvals would not be reconsidered in this situation such that her past employment would be retroactively stripped of its qualifying status. Rather, in such a scenario, the Department’s decision would bear on whether the borrower has met all of the final qualifications for loan forgiveness, including being employed in public service at the time she submits the forgiveness application, not whether her prior ECF-approved employer(s) qualified under the statute and regulation.” – Source

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Your situation is very similar to that faced by the Plaintiffs in the American Bar Association case since “the denials’ retroactive application had the immediate effect of wiping out what Plaintiffs believed in good faith to be years of qualifying payments toward obtaining loan forgiveness. The Department gave Plaintiffs every reason to believe that it had accepted and recorded payments for many years.”

Bottom line – the PSLF program is a mess and there appears to be no evidence forgiveness will be granted or even what the actual process is since the Department of Education keeps changing the rules.


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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • Hi, there, does anyone have any advice for this situation? I have received regular documentation that my student loan will be eligible for forgiveness as of August 2020. The last correspondence I received stating that was in October 2017. Then in December 2017 I received a letter stating I was eligible in August 2021! I called and the lady I spoke with said she would look into it and it would take a couple of months for me to get a response. I never heard back so I called today and now I’m told that I made 9 payments in 2011 that were a dollar short so they don’t count! I have never received notification that I underpaid my loans, and further, I’m in autopay and always have been, so they have just deducted my payment. I have never selected the amount to be paid! I’ve asked to contest this, but I was told that just means that they will review my account and send me the results. I’m not too hopeful that this will turn out in my favor. He had no explanation as to why up until December my loans were on track for 2020.

    Has anyone experienced something similar? Any suggestions?

    • I’m not surprised. I suspect the current Department of Education under DeVos is going to look for every single issue to deny PSLF loan forgiveness. Your experience is not unusual. Keep good documentation. Print everything out. Keep it in a safe place. You may need to hire a consumer attorney to sue the Department of Education if they can’t straighten it out when you are eligible for forgiveness. The big gotcha is going to be the requirement that you are working for an eligible employer at the time the loan is forgiven. Who knows how long that will take from the time you are eventually approved for forgiveness. It’s a huge loophole for them to deny claims.

  • Ridiculous. The same thing has happened to me. They should be held accountable for their actions. I’ve been working (and paying) faithfully for 10 + years at qualified employers. I ensured I called them when I began paying my loans to sign up for a payment plan that was covered under the PSLF act; and now they claim my income based payment plan wasn’t one of the ‘income based payment plans’ that qualify for PSLF. It’s ridiculous.

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