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Why Did My Federal Student Loan Balance Drop to Zero?

If your federal student loan balance suddenly drops to zero, there are several logical reasons that might explain what happened.

Written By: Michael P. Lux, Esq.

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If your federal student loan balance mysteriously dropped to a $0 balance, it might seem like a dream come true.

Was there student loan forgiveness or cancellation? Did someone else pay off my debt for me? Was there a lender error that means I’m debt-free?

There are several reasonable explanations for the zero-dollar balance. In some cases, a borrower truly is free of their debt. In others, the debt moved.

When a Zero Balance Means Loan Forgiveness

The Department of Education is performing a one-time audit of borrower payment histories and giving borrowers credit for months that previously didn’t count.

For example, prior payments on the standard repayment plan, as well as some deferments and forbearances, may now get credited as progress toward loan forgiveness.

Borrowers who had their balances forgiven should receive an email from their lender. Additionally, their servicer portal should also show that the loans were forgiven under the IDR adjustment.

If you got an email and see this language on your servicer portal, congratulations!!

Sherpa Tip: The one-time adjustment is happening right now for the borrowers close to earning forgiveness. For other borrowers, it will take place in the summer of 2024.

In most cases, borrowers do not need to take any action. However, some will need to consolidate their loans by June 30, 2024.

The Disappointing Reason Your Federal Student Loan Account has a Zero Balance

Sadly, a zero balance on a servicer portal doesn’t always mean loan forgiveness.

In some cases, it just means your loans got moved to a new servicer.

Unfortunately, this is a pretty common occurrence. The federal government has contracts with several different loan servicers. Sometimes these contracts are renewed; other times, a new company gets the contract.

In some cases, only certain loans get moved. Thus, it is possible your balance dropped significantly but didn’t go all the way to zero.

Sherpa Thought: These transfers shouldn’t be so confusing for borrowers. If servicers or the Department of Education did a better job notifying borrowers, people wouldn’t be surprised to see a $0 balance.

Tracking Down Transferred Loans and New Servicers

To the credit of the Department of Education, they do a nice job helping borrowers track down the appropriate servicer.

Within the studentaid.gov website, there is a database of student loans that borrowers can access. Within this database is a breakdown of every loan and the company responsible for servicing the loan.

If I saw an unexpected drop in my federal student loan balance, studentaid.gov would be my first stop. Because navigating to individual loan information is a bit complicated, I’ve put together this guide on accessing the records.

The Public Service Loan Forgiveness Waiver

If you previously applied for Public Service Loan Forgiveness, your loans may also be forgiven.

On October 6, 2021, President Biden announced that the Public Service Loan Forgiveness rules were temporarily changed. Previous payments that didn’t count because the borrower was on the wrong repayment plan or the loans were not eligible may now count.

If you have previously applied for Public Service Loan Forgiveness or completed an Employer Certification Form, the Department of Education may have reconsidered your application.

This article breaks down the new program and rules in more detail.

Other Possibilities for a Federal Student Loan Balance Drop

A balance transfer or PSLF may be the most likely explanation, but other possibilities exist.

For example, President Biden recently announced plans to cancel $1 billion worth of student loans for borrowers defrauded by their schools. This is a continuation of an Obama-era program that was significantly limited during the Trump years.

However, it is worth noting that the borrower defense to repayment cancellation only happens to borrowers who successfully apply to have their loans canceled.

Another slight possibility is if Congress or the President chose to cancel large amounts of student debt for all borrowers. As of the date of this article, no such plans exist. Even though there is some support for massive forgiveness, it is far from a certainty. Additionally, if something like that did happen, it would be all over the news.

Preventing the Transfer to Another Servicer

Federal servicer transfers can be a significant issue for borrowers. And the problems go beyond the disappointment of learning a zero-dollar federal student loan balance just means the debt has moved.

A change in servicers can have many negative issues for borrowers:

  • Payments may be missed due to auto-debit issues.
  • Frequent servicer changes open the door to fraud.
  • Payments may be missed because banks mailed checks to old servicers.
  • Important records and communications may get lost.

Worst of all, borrowers have very little power to prevent a servicer change. If your student loans are on the move, take these steps to streamline the process and avoid issues.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

26 thoughts on “Why Did My Federal Student Loan Balance Drop to Zero?”

  1. This can be quite fortuitous under the right conditions.

    I had a private loan with a cosigner and a variable interest rate that I could not refinance due to a large student loan balance. When the federal loans were transferred to another servicer, it temporarily disappeared from my credit history, and my score went up by 43 points. I was then able to secure refinancing on the private loans with another lender at a fixed rate, saving me thousands of dollars of interest in the process and reducing my time in repayment.

  2. Hi-
    Payments have been drafted from my bank for IDR since 2006, and I applied for loan forgiveness.
    On studentaid.gov, each of my loans had the current servicer listed (Nelnet) with the net loan amount as well as the following—
    Current Loan Status:DP
    Current Loan Status Description:DEFAULTED, PAID IN FULL
    Highest Historical Outstanding Principal Balance (OPB): $VALUE
    Current Standard-Standard Schedule Payment Amount:$0.00
    Permanent Standard-Standard Schedule Payment Amount:$0.00
    Loan Status:DP
    Loan Status Description:DEFAULTED, PAID IN FULL
    Loan Status Effective Date:08/05/2023

    However, nelnet sent me a letter on the 14th and the portal now shows that I owe the original net loan amounts plus all accrued interest. If I downloaded my student aid data file and took screenshots of the webpages showing that my loans were paid– can I use it as legal evidence?

    • Keeping detailed records is always a good idea, and it definitely could come in handy in the future.

      Whether or not you can use it as evidence in a legal proceeding is a technical question that will depend on a number of different factors. That is something to discuss with your attorney if it looks like you might be headed to a trial.

  3. Hello there,

    Here are the events:

    1) 1996 graduated with Associate’s Degree with loans
    2) 2018 graduated with Bachelor’s Degree, consolidated loans
    3) 2021-2023 – Graduate school
    4) 6/28/2023 – consolidated all loans and applied for PSLF (total debt over $161,000 – yikes)
    5) 6/12/2023 – Mohela PSFL status “A notice has been sent. Please allow 7-10 business days for the notice to be received.”
    6) 6/23/2023 – Received letter from EdFinancial stating that my loans were being transferred to Mohela due to PSLF
    7) 7/7/2023 – received letter from EdFinancial stating that they were previously going to transfer to Mohela, but were not going to transfer
    8) 7/14/2023 – FAFSA (EdFinancial servicer) loans appear as $0. EdFinancial states “Paid by Consolidation”
    9) 7/15/2023 – EdFinancial letter stated loans paid by consolidation

    No word since. PSLF form status still states “A notice has been sent. Please allow 7-10 business days for the notice to be received.”

    • Have you called MOHELA? They handle the PSLF processing, so they will either have your loans or they can verify that they were discharged.

      You might also qualify for IDR forgiveness after the IDR count update. I’d ask MOHELA about that too.

      I’d be very interested to hear what they have to say.

      • Thanks for the response, Michael! I talked to Mohela this morning, and they said the loans were set to transfer on 6/12/2023 and could take up to 60 days. Mohela stated that the loan should be popping up in their system any day now and they had an account number for me.

        The confusing part is my receiving that paper letter from EdFinancial that they changed their minds and the loan WASN’T being transferred to Mohela. There is no electronic version of this “letter” in my Inbox in my EdFinancial or FAFSA accounts. Perhaps that paper letter was generated by accident and sent out. So I guess we’ll see!

        To close the loop on this post, I’ll post an update when things get resolved.

        Thanks for helping us!

  4. I dropped college, and had 1.5k left to pay for the semester, and was put on a financial hold, I looked back today and its at zero? There is nothing to show why it is, where, ect.

    • When you say you looked back today and the balance was zero, what account are you checking? If they were federal loans, you might want to check the federal database.

      If the balance was with your college, there are a number of possible explanations. It could be something good like the debt was forgiven/canceled, or it could be something bad like the debt was sold to a collection company. The best way to know is to call an ask for an explanation.

  5. Thank you Mr. Lux for your expertise regarding the complicated-confusing pslf waiver program.

    If a person has over 120 “qualifying” “certified” “eligible” payments, and their mohela servicer student loans owed is now a negative balance-would this be a refund due?

    The fed student aid site still has the original loans present on their web site yet mohela corporation has a negative loan balance stated for past weeks. There seems to be conflicting data present.

    Thank you for clarification on this complex and bureaucratic process.

    • Lisa, your potential explanation for this situation definitely makes sense… especially if you recently applied for PSLF.

      Mohela took over as the PSLF servicer very recently, so I’m hesitant to say for certain. I’d suggest giving them a call and asking for an explanation.

  6. For the last month, my balance on studentaid.gov has shown zero balance. I know they said they are transferring my loans from myfed to Mohela. However, myfed shows paid in full by consolidation. All my payment records are not able to access. I am not able to log into mohela or aidvantage. They do not see me. I was previously on PSFL with my loans and consolidated a second time the parent plus loan so all my payments would qualify. Now I am concerned because no one has a record of me or my loans or payments. What should I do? Did they get all forgiven?

      • I have about 48 payements that were counted in PSLF prior to this current consolidation and moving of my loans. So technically I have some to go. I have worked for my employer over 10 years and I have had other student loans that were paid off so not sure if they counted those payments as well. I am afaid to encouter. I want them to disappear. ( my hopes). Should I reach out to studentaid.gov they show me havine zero loans or grants. It doesnt even show paid off anymore.

      • I keep logging in. I even had a chat open with studentaid.gov They could not provide an amount due or anything. After I insisted they got a second chat person one who said they can’t find that I owe anything is all they told me. I download that chat as well. This is all I can find.
        My Aid
        You currently don’t have any federal loans or grants.
        I look under correspondence and nothing.

  7. My loans were serviced through Navient and transferred to Aidvantage. I recently filled out the PSLF which I already have over 120 qualified payments and have confirmation for my application from Fedloan along with a new account number with them. I have since consolidated with Mohela. However, studentaid.gov, Mohela, and Aidvantage all have my loan balance at zero but I haven’t received confirmation of forgiveness. Neither my SS or account number even work with myfedloan.org. I’ll wait this out a little longer but wish someone knew what was going on but nobody from Mohela, studentaid.gov or myfedloan.org does. I just don’t want to find out all of a sudden I have a balance again after the 10/31/22 deadline.

    • Hi Brian,

      I recently had my loans transferred from FedLoan to Mohela too, so I share your frustration with the process. All my balances show a $0 balance, but unlike you, I haven’t reached 120 qualified payments.

      I think you should be fine because it sounds like you have already done everything necessary before the 10/31/22 deadline. If you have already consolidated and submitted PSLF paperwork, you should be in good shape. It can take a while to process everything.

      Once Mohela has all of your records, and I’m told that shouldn’t take more than 10 days, they should be able to verify things for you.

      • Can we qualify for PSLF and the biden debt cancelation? I was working towards consolidating through mohela literally the same week i submitted biden came out stating the one-time cancelation for fed borrowers. My studentaidgov now says 0 balance due to consolidation. Im wondering if im still eligible for the cancelation of 10k or 20k pell grant borrowers?

    • Any updates to this? I also all of a sudden have a zero student loan balance with information that my loan was consolidated/transferred to Aidvantage which I am hoping is part of the next step of the PSLF/TEPSLF program.


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