My loans have been in repayment since 2010, and I have been on IBR the entire time.  In May 2013, I submitted a PSLF employment certification for the first time.  My eligibility for PSLF was certified and, as a result, my loans were transferred to FedLoan Servicing.  In August 2013, I was required to submit the necessary documentation to re-certify my eligibility for IBR.  I sent the documents and was allowed to continue on IBR without any problem, although the amount of my monthly payments did not change.

Earlier this month, I contacted FedLoan Servicing and asked them to confirm the number of PSLF-qualifying payments I had made prior to August 2013, something they never did at the time they took over servicing my loans. They took care of this for me but, in the course of doing so, they appear to have noticed the above-mentioned IBR re-certification documents for the first time.  A forbearance was applied to my account and the amount of monthly payment was revised upward.

I have no problem with the revision of my monthly payment, which appears to be accurate.  My problem is with the forbearance, which I did not request and which will cause all of my outstanding interest—a not insignificant amount that I am not in position to pay off—to capitalize.  When I called FedLoan Servicing, the woman I spoke to told me it doesn’t really matter because I’m going to have my outstanding balance forgiven, whatever it is, under PSLF.  I only wish I could be as confident as she is that PSLF will still exist unchanged by the time I’ve made 120 qualifying payments.  (And, on a related note, should a major student loan servicer really be ENCOURAGING borrowers in repayment to let their interest capitalize?)  When I e-mailed them, the reply told me that it was an “administrative forbearance” that had been applied in order to “process a new Income-Based Repayment application,” something that the terms and conditions of the IBR application note may occur.  Is this legitimate?  Does the re-certification that I submitted in August 2013 (this must be what they’re talking about) really count as “a new IBR application” such that they can apply a forbearance without my requesting one?

Sorry to have written a novel.  Thanks in advance to anyone who might be able to shed some light on this.

Someone can correct me but I thought an “administrative forbearance” existed for the sole purpose to NOT capitalize unpaid interest during the forbearance period.

rob554 - 31 March 2014 02:42 PM

Someone can correct me but I thought an “administrative forbearance” existed for the sole purpose to NOT capitalize unpaid interest during the forbearance period.

I was hoping that they’d tell me something along those lines when I first contacted them about this, but no such luck.  All they did was confirm my concern that the interest would capitalize once the forbearance expired.

On the plus side, I kept at them (via e-mail, not the phone) and eventually got someone to acknowledge that, yes, the forbearance was applied in error.  The same person said she’d submit a request to remove the forbearance WITHOUT the interest capitalizing.  All well and good, except that was four days ago and the forbearance remains in place.  It expires on its own tomorrow, and I’ll bet good money that my interest will capitalize at that time, despite Fedloan’s assurances.  Oh well.  Since I’ve already got them admitting their error in writing, I suppose getting them to fix apply the necessary corrections won’t be too painful . . .

I just applied for an IBR and was approved.  Nonetheless, I received a message this evening that my account was put into forbearance.  I am furious because I now have to fix this mess that THEY created.

CJT1101 - 31 March 2014 07:38 PM

rob554 - 31 March 2014 02:42 PM

Someone can correct me but I thought an “administrative forbearance” existed for the sole purpose to NOT capitalize unpaid interest during the forbearance period.

I was hoping that they’d tell me something along those lines when I first contacted them about this, but no such luck.  All they did was confirm my concern that the interest would capitalize once the forbearance expired.

On the plus side, I kept at them (via e-mail, not the phone) and eventually got someone to acknowledge that, yes, the forbearance was applied in error.  The same person said she’d submit a request to remove the forbearance WITHOUT the interest capitalizing.  All well and good, except that was four days ago and the forbearance remains in place.  It expires on its own tomorrow, and I’ll bet good money that my interest will capitalize at that time, despite Fedloan’s assurances.  Oh well.  Since I’ve already got them admitting their error in writing, I suppose getting them to fix apply the necessary corrections won’t be too painful . . .

CJT1101,

Did you ever get this rectified?  I am an attorney investigating FedLoan Servicing for these types of practices, and would like to hear more about your experience with them (at no cost or obligation to you).  If you don’t mind answering a few quick questions, you can reach me at .(JavaScript must be enabled to view this email address).

Thanks,

David

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