Hi,

I was wondering if you could tell me if I have the basis for a class action lawsuit.

In a nutshell, Direct Loan Servicing put me on an incorrect repayment plan for public service loan forgiveness back in 2010.  When I found out, I wrote a letter to them stating that their employee (Tasha) put me on the wrong plan.  They wrote back and admitted their mistake and acknowledged that all of my payments would indeed count.  So, a year goes by, and I think that everything has been resolved.  I could log on to their website and see all of my qualifying payments counting toward PSLF (Public Service Loan Forgiveness).

Then, in 2012, my loan was transferred to Fedloan Servicing.  When I called them to find out why my qualifying payments weren’t appearing on their website, they claimed that they were still reviewing the file.  Well, come to find out, they are now trying to claim that my payments Direct Loans messed up on won’t count.  Even though I’ve sent them a copy of the letter from Direct Loans, they are refusing to count them because I “wasn’t on the right plan.”  I have since called Direct Loans regarding the situation, and I have an audiotaped conversation in which a Direct Loans’ supervisor states that the payments should still count after the transfer.

As it turns out (based on research and a conversation with a gentleman at Fedloan Servicing, whose name and voicemail I still have), there are hundreds of us in the same situation.  We’ve all been put on the wrong plan by Direct Loans (which they acknowledged in writing) and are now being denied payments by Fedloan Servicing that Direct Loans was allowing (due to their error).  According to a conversation with that same gentleman at Fedloan Servicing:

“Direct Loans didn’t know what they were doing and giving people misinformation.” 

Yeah, well that’s not our fault.  How is this legal?  To me, it’s as if my mortgage were sold to someone else, and now I’m being told my previous mortgage payments won’t count. 

There are several websites where people are addressing this issue.  Ultimately, I think we are going to need to take legal action.  If all else fails, I may try to take Fedloan Servicing to small claims court to get at least $2000 of my $5000 in denied payments back.

Here are some of the links (hopefully, they work; they block facebook here at school):

Public Service Loan Forgiveness Program Debacle - About | Facebook
http://www.facebook.com/.../Public-Service-Loan-Forgiveness…/...
Public Service Loan Forgiveness Program Debacle. 5 likes ... The Department of Education is trying their best to avoid a class action lawsuit. In 2007, Direct Loansbegan misadvising customers enrolled in the Public Service Loan Forgiveness ...

I, too, was on the… | Facebook
http://www.facebook.com/permalink.php?id=190843774383732…fbid...
You may contact me at .(JavaScript must be enabled to view this email address). 1Like • Comment. Stacey Fenner and Public Service Loan Forgiveness Program Debacle like this. Marcelle ...

Here’s another link (scroll down to Heather’s story; I’ve tried contacting her at .(JavaScript must be enabled to view this email address) but haven’t heard back yet):

http://camilleschenkkan.wordpress.com/2012/07/15/check-your-loans-a-post-about-pslf/

Any assistance in this situation would be greatly appreciated.  Is it legal to deny payments after a loan transfer?

Thanks!
Teacher Seeking Justice

Hello N_C_A,
  Sorry to hear that you are having this problem.  Unfortunately, due to the laws, rules, and regulations governing attorneys’ practicing law outside of their licensed jurisdictions, Heather cannot provide you with personalized legal advice without first associating with local counsel in your state.  That said, there are a number of places where you can find legal representation in your jurisdiction who can advise you on this matter.

Heather is a member of the National Association of Consumer Advocates, and that’s the first place to look for an attorney specializing in consumer law in your area: http://www.naca.net/find-attorney.  Depending on where you live, I may have more specific recommendations.

Good luck!

Best,
James Jarvis
Communications Director
Heather Jarvis, Student Loan Expert LLC

The problems with student loan servicing are significant and terribly harmful. 

I second James’ response above and also recommend that you lodge a formal complaint with the student loan ombudsman at: https://studentaid.ed.gov/repay-loans/disputes/prepare/contact-ombudsman

I also suggest that you consider notifying your elected congressional representatives; they hear from me and other advocates all the time, but it helps when they hear from their constituents.

Please let us know how it goes.

n_c_a wrote:

As it turns out (based on research and a conversation with a gentleman at Fedloan Servicing, whose name and voicemail I still have), there are hundreds of us in the same situation.  We’ve all been put on the wrong plan by Direct Loans (which they acknowledged in writing) and are now being denied payments by Fedloan Servicing that Direct Loans was allowing (due to their error).

n_c_a,
Did you ever seek legal assistance for this wrongdoing by Fedloan Servicing and did you find there might be a basis for a class action lawsuit?

An IDENTICAL situation happened to me and, in my humble opinion, it is totally illegal and I very much hope Fedloan servicing finds themselves facing a class action lawsuit for their actions.  I requested an IBR repayment plan in 2009, but Direct Loans put me on a 20-year standard repayment plan instead, so I filed an ombudsman case in the past in which it was resolved that my payments from 2009 would count as qualifying payments.  However, after my loans were transferred to Fedloan servicing and countless phone calls, Fedloan finally informed me that it won’t count my 2009 payments toward loan forgiveness because I was on the wrong repayment plan in 2009.  What, do they not take seriously letters written from the US Department of Education and is the ombudsman a useless agency to the consumer?? I am re-filing my ombudsman case and may pursue a small claims court case against Fedloan as well.  I appreciate Heather and James’ posts on this matter, as I may seek an attorney through the National Association of Consumer Advocates.

I used to think Fedloan servicing had good customer service when my loans were with them in the past (the phone reps would even ask you to fill out a phone survey at the end of the conversation in the past), and I still think they have better customer service than Direct Loans or are at least as a whole more pleasant and forthcoming, but once they took on the PSLF program, I worry that much of this dedication to the consumer and quality customer service has gone right down the toilet.

I am a very upbeat, positive person and told over 233 employees to consider pursuing PSLF at my own place of employment in 2009.  I almost regret encouraging them in this way because of how the student loan lenders have operated.  This post must be written.  A vent against FedLoan Servicing is warranted.  Never did I imagine the paperwork nightmare, excessive mishandling (on their end), lies, and everything else I have encountered with Direct Loans and, now, Fedloan Servicing.

UPDATE:
I went through the Ombudsman to try to resolve Fedloan not counting my 2009 payments toward PSLF, and, although my complaint was stated explicitly in writing, the last time we talked the ombudsman representative couldn’t even remember from what year my payments were being denied toward PSLF.  Needless to say, no help there.  No accountability from the Ombudsman.  Maybe the Ombudsman is just the fox guarding the henhouse.

Fast forward to my current opinion of Fedloan:

It is basically an UNACCOUNTABLE organization that can do what it wants and get away with it.

Imagine this scenario:

1) Direct Loans put you on the wrong repayment plan (against your written intentions) that does not count toward PSLF.

2) Direct Loans corrects their mistake in writing twice in writing.

3) FedLoan Servicing denies you for payments counting toward PSLF, despite Direct Loans twice putting this in writing.

4) FedLoan reps are rude on the phone (tip: it’s better just to correspond with them via email, so everything is in writing), and the supervisors are no better.  FedLoan used to have you fill out a survey on their customer service before they took over PSLF, but not anymore.  They’re unaccountable and this organization is too big too care. 

5) In the meantime, you lose every payment counting toward PSLF - this could be as low as a few hundred dollars to THOUSANDS.

6) Sadly, the only way FedLoan will become accountable or change is if you SUE them…..which I just may consider, even if I lose financially in the end.

It happened to me, and it could happen to you.  I could go into more detail about how irresponsible FedLoan has been, but I would rather keep this brief.  This is, unfortunately, how some large organizations operate.  The guidelines put forth by the US Department of Education on PSLF mean nothing to FedLoan Servicing.  I do wish they would follow them closely.  They don’t care about me and they don’t care about you.  I will change or delete this post if FedLoan becomes accountable for what it did to me, but don’t hold your breath.

For more about the huge problems in student loan servicing see:
http://askheatherjarvis.com/blog/sallie-mae-needs-to-do-more-to-educate-borrowers-on-repayment-options
http://askheatherjarvis.com/blog/new-cfpb-report-private-loan-processing-pitfalls-to-avoid
http://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=311843
http://www.propublica.org/article/student-loan-borrowers-dazed-and-confused-by-servicer-shuffle
http://www.nytimes.com/2013/12/03/your-money/student-loans/consumer-watchdog-to-monitor-student-loan-servicers.html?emc=edit_tnt_20131203&tntemail0=y&_r=0

Thanks for sharing those links detailing the problems with student loan lenders!

I found the last link, a New York Times article that just came out yesterday, particularly intriguing - that the CFPB will be granted supervisory authority over large student loan lenders as of March 1st, 2014.  I assume this means the Ombudsman of the US Department will soon have supervisory power over lenders, whereas before it didn’t. 

The Ombudsman representative I corresponded with would always state that she can’t make FedLoan Servicing act differently or enforce the outcome of my previous Ombudsman complaint, which was that my 2009 loan payments should count toward PSLF.  Am I correct in assuming that - as of March 1st, 2014 - she can?

A Brief Update:

Unfortunately, my opinion of FedLoan Servicing as an unaccountable organization still remains. 

Despite extensive documentation sent to them clearly supporting the case that my 2009 payments should count toward PSLF, it appears that FedLoan has not reviewed it. 

I would encourage those who have a dispute with FedLoan Servicing to keep everything in writing to the extent possible.  This is so there is no misunderstanding.  A lesson from my experience:  I made a phone call in 2009 to Direct Loans in which I sought to ensure my repayment plan was income-based repayment or IBR.  Based on this phone call and a misinterpretation by a Direct Loans representative, Direct Loans granted me a forbearance against my wishes, but later recognized that this was not my intention and put it in writing that my payments should count toward PSLF.  Nevertheless, when my loans were transferred to FedLoan Servicing, FedLoan ignored the letter from Direct Loans, never understood this point, and the Ombudsman did not convey that Direct Loans recognized that I wanted IBR, not a forebearance.  On a recent correspondence, for instance, FedLoan used a phone call I made in 2009 to suggest that I wanted a forbearance.  Thankfully and to their surprise, I was able to clarify the purpose for the phone call with no problem, despite that it’s 4 1/2 years later.  I had to argue and re-explanation after over a year of being with FedLoan Servicing, despite Direct Loans’ recognition of this mistake, and despite the letter sent by Direct Loans, which took more than a year to get Direct Loans to write.  It was like I was starting at Square One when my loans were transferred to FedLoan Servicing. On top of that, the FedLoan reps were rude and argumentative, despite the fact that I had extensive documentation to back up my claims, which I shared with them, but they never reviewed.

Of course, the downfall of trying to keep everything in writing with FedLoan is that they can just ignore your letters.  If you send an email, for instance, FedLoan will state that they will respond personally within 2 business days, but then will just generate some generic FAQs letter instead of responding personally.  This has happened to me on more than one occasion.  Ultimately, I ended up calling and speaking with a supervisor as that is the only way some headway will be made.  So try to maintain all correspondence with FedLoan in writing, but beware that they may just ignore you, as they did me. 

After finding out I am in the same boat too. I was put in the wrong repayment program and recently found out after almost 6 years of repayment. Have anyone heard of anyone doing a class action regarding Direct Loans and PSLF?

Also in the thread you stated that people should write their legislators. I was informed by Randy Jones at the Loan Ombudsmans office that writing them has little effect since it the letters are forwarded to the Ombudsman program. (Who basically do nothing)

The other thing I have a question is what is the authority of the Ombudsman program?

Ouch!  6 years of being put on the wrong repayment plan by Direct Loans (against your written intentions?) is a LOT of payments to not count toward PSLF.  What a shame you didn’t find this out sooner.  I have not heard of any class action lawsuit taking place against Direct Loans with respect to PSLF.  I hate to be a pessimist but, unless you have excellent documentation of your prior intentions to be on PSLF (and perhaps hire an attorney), I am not sure how much success you will have in getting all those payments (upwards of 72?) to count toward PSLF, as it sounds like an uphill battle.

I would think that legislators would not simply forward the complaint to the Ombudsman office, but would be more responsive to you as a voter and constituent. 

In my own experiences, I found the Ombudsman office to be somewhat helpful - they did help resolve some of my concerns with Direct Loans (and FedLoan Servicing) and they are in a supervisory capacity over FedLoan Servicing (I believe as of March 2014), although the Ombudsman rep. I worked with would often say they can’t make FedLoan Servicing act differently.  Another resource you might consider is the Better Business Bureau, as it’s free and FedLoan Servicing or Direct Loans would at least be responsive to them if you state your case clearly.  You would probably have better success using one of these free third parties - the Ombudsman Office or BBB - than trying to deal directly with FedLoan Servicing or Direct Loans, particularly if you have already given the lender an opportunity to address your concerns first. 

Yeah, after reading the comment above, where the lady did have proof, and nothing was done. I am almost out of gas. I work at a public interest law firm and I am going to see if there is a way to do a class action. I would also like to do a public records request from the Ombudsman to see how many times this happened and then contact the congressional committee that was involved with direct loans and the PSLF program. It seems to me that this could be easily rectified by allowing the payment count for the PLSF. The Ombudsman stated that there was no place to appeal that decision. I am going to try my best.

This error cost me 30k BTW

I did have a lot of proof, also, and it took incredible persistence over 5 years to get FedLoan Servicing to actually “dig a little deeper” (i.e., do their jobs!)and verify that my request was justified, but I was successful in the end.  Of course, the amount I almost lost was nowhere near 30k.  With that much at stake, if you have excellent documentation, I would hire a lawyer.

Please keep us posted on how you make out with the public records request and exploration of a class action lawsuit, if you believe some of that information is appropriate to share online.

After speaking with an attorney friend, there could be grounds for a class action lawsuit on the grounds that Direct Loans mislead people and baited them to leave there current loan s providers in order to be eligible for PSLF. Since I have no written proof of this, (Other than assurance more than once over the phone) I would have to be a rider on the person that did have proof in writing that Direct Loans screwed up.(Like the lady above) This could save people Thousands in not millions of dollars. I am going to speak with an attorney that would take the case if they decide it has merit. The only problem is it will be data intensive.

PSLF Seeker - 25 August 2014 11:59 AM

I did have a lot of proof, also, and it took incredible persistence over 5 years to get FedLoan Servicing to actually “dig a little deeper” (i.e., do their jobs!)and verify that my request was justified, but I was successful in the end.  Of course, the amount I almost lost was nowhere near 30k.  With that much at stake, if you have excellent documentation, I would hire a lawyer.

Please keep us posted on how you make out with the public records request and exploration of a class action lawsuit, if you believe some of that information is appropriate to share online.

We most likely would need a person you to be the center of the class action since you have the needed documentation.I would be a “rider” backing up your proof by admitting the same scenario happened to me. (God knows how many other people this happened to)  I am an idiot and just trusted them. I even called them before I was switched to Mohela,  to ask If I needed to provide some paperwork to prove that I work in a non-profit and they stated “No just submit the needed form at the end of 120 Payments”  Wrong again, you have to submit the form yearly.

The Ombudsman admitted that there is no where they could go to appeal the matter. Next stop is the lawyers office.

I’ve had a similar experience to others in this thread. Upon being unilaterally moved to FedLoan in 2012 my repayment plan and terms were changed without my consultation or consent to a PSLF ineligible plan. When I realize this a few months later I ask to be switched to an eligible plan. At the time phone agents and their supervisors indicated it should be a straightforward matter to have the situation reviewed and the earlier payments deemed eligible. I was told the process would take months. I follow-up periodically and get reinsurances and, generally, the runaround. Eventually I’m told my request is denied but that it can be reviewed. Then I’m told it is reviewed but receive no notification that it was completed nor can I obtain a description of what was decided and why. Indeed, some agents I speak with are unsure that a review actually occurred. Last week I finally receive a very generic explanation of PSLF payments that makes no mention of my specific situation.

Alongside all of this the fact that I’m in a standard repayment plan, but one that was re-disclosed (presumably incorrectly) such that the ten years started when I was moved to FedLoan, not when my loans were dispersed. This is fine by me in that I’ll reach 120 payments with several years outstanding on my loans. However, I occasionally am told that my payment plan “is ineligible” even though what they mean is that under normal circumstances I’ll pay off the loan at the same time I become eligible for forgiveness; ergo, no benefit. Except in my situation I will benefit. Still, it’s a hassle to constantly explain my specific situation and the repayment plan calculator suggests I’ll save $40 a month so I switch to a ICR. Once processed the payments are more than twice what the estimate was! Bait and switch? Now I’m asking to go back to my previous plan, but am nervous about how it will be re-disclosed.

Finally, I don’t like the fact that one is automatically place on an administrative forbearance when payment plans change. While undoubtedly well intentioned, in practice it merely extends the length of time before reaching 120 payments. Thus far I’ve been unsuccessful in obtaining a waiver to have the payments count.

In short, PSLF as implemented by FedLoan feels fishy and I’m confident I’m being bilked. Whether there is a legal case or not I don’t know, but I’d be interested in pursuing such action and have lots of documentation to support my position.

I have the same kind of PSLF horror story with Fed Loan Servicing.  Their customer service and support consistently provides incorrect information.  Information that always leads to “banking errors” in their favor and their “processing time” would make your average DMV blush.

For me, I started a relatively low paying job with the state.  $2800 monthly take-home with $1300 monthly going to Fed Loan if I was to make full payments.  When I started my job I was on a $975 p/mo graduated plan.  First thing I did after getting the job was contact Fed Loan to figure out how to get into PSLF at a rate I can afford.  They tell me to apply for IBR and not to worry about PSLF because it will count back my payments from my job certification date.  They tell me I cannot apply for IBR until I have two months worth of pay stubs.  So I wait two months and then apply.  I call in again and check to explain what I am trying to do and to make sure I am on the right paperwork path.  They say yes. 

It takes them another 4 months to process IBR (6 months since I started the job).  Of course, as you all know, graduated payments don’t count towards PSLF, something they conveniently failed to mention throughout all my discussions with them about payment plans and setting up PSLF.  So they cash my checks, deny me six months of PSLF credit.  Fine, whatever, I’m signed up for IBR and PSLF on all my Fed Loans like I requested.  NOPE.  They put all my loans into IBR (payments now $350) but only consolidated half my loans and left the other half unconsolidated.  I don’t find that out until 9 months later when I try filing a rectification of my employment that I have $55k in loans that I’ve been paying for 15 months without receiving any PSLF credits.  I fight, argue, cuss, fuss, and dispute but they don’t care.  I consolidate the remaining loans (which they tried to consolidate together into my previously consolidated loans, which would have created one big new loan and lost the 9 months of PSLF I had on the loans done correctly) which they then place into forbearance/deferment and won’t take out and now I am fighting with them over being allowed to make a qualifying payment for this month of September so as to avoid losing another month to indentured servitude. 

As I stand now, in the last 16 months I have made over $5k in non-PSLF qualifying payments to Fed Loan.  I’ve only received credit for 9 payments on 5 of my original 8 loans and credit for 0 payments on 3 of my original 8 loans.  I’ve contacted the BBB to complain, filed with the Ombudsman, and contacted my congressman and authorized him to act on my behalf.  Nothing to show for it so far.  It is a sickening feeling to know that you are being taken advantage of and not being able to do anything about it.  I’m about ready to find a way to permanently disable myself so I can meet the undue hardship burden for student loan bankruptcy. 

Any thoughts, suggestions, or ideas I have not considered would be greatly appreciated.