Editor’s Note: I consolidated my massive student loan debt in early 2013. My experience with student loan consolidation was part of why the Student Loan Sherpa came into existence. Nearly a decade later, I’m still hearing from borrowers with the same problem.
Over the past few months, I have been working on my own federal student loan consolidation.
With well over 100k in student loan debt, I’ve been very careful to ensure that this new consolidated loan would still be eligible for income-based repayment and the Public Service Loan Forgiveness plan. At this point, I could probably dedicate an entire blog entry just to the hold music I encountered.
Early Hopes Dashed
After doing everything I possibly could to ensure that my consolidation went flawlessly, I was delighted with the initial results.
After less than two weeks, I received a letter from MyFedLoan indicating they would be consolidating my student loans. This would take place in 15 days unless I called to stop the process (this is the final warning because once your student loans are consolidated, there is no “unconsolidation“).
After waiting about two weeks, I anxiously logged on to MyFedLoan.org to see my loan status. Sure enough, my new consolidated loans were there. One was subsidized, and one was unsubsidized (they’re kept separate because the unsubsidized loans still carry a couple of perks this far into repayment).
However, much to my dismay, all my old loans were still there, as well. As you can imagine, I was pretty shocked to see that my student loan debt had effectively doubled.
Double Student Loan Debt Panic
I immediately called MyFedLoan to find out what the problem was. I was fairly confident it was just a matter of updating their records. Given how much money their website said I owed, however, I wasn’t going to wait around. My conversation with them only made me more nervous.
When I called, I calmly explained that I had just consolidated my student loans. Their website indicated I owed both the new consolidated loans AND the old loans. The lady on the phone was not the least bit surprised to hear this information.
My Conversation with MyFedLoan
Our exchange went something like this:
Me: Your website shows I owe double the debt.
MyFedLoan: Yeah, that happens.
Me: Can you please fix it? I don’t want you guys reporting to the credit agencies that I owe double.
MyFedLoan: Well, we don’t actually know that they are separate. You will have to call Direct Loan and ask them to fix it.
Me: What happened that would explain my debt showing up double?
MyFedLoan: Well, sometimes they tell us you have the new loan, but sometimes they forget to pay off the old ones.
Me: They what? How often does this happen?
MyFedLoan: Oh, probably 1 or 2 in 50.
I have no idea how accurate her statistic was, but I was quite concerned. After asking a series of further questions and not getting any help whatsoever, I realized that this call would no longer be productive. I thanked her for her help and proceeded to call Direct Loan.
The Call with Direct Loan
After being on hold with Direct Loan for about a decade (possibly an exaggeration), I was finally speaking with someone about my newly doubled debt. I explained my situation to the Direct Loan person on the phone. She stated, “They should have gotten a check from us.” I agreed and told her, “They should have gotten a check but claim not to have received one.” She then told me that there was nothing she could do and take up the issue with MyFedLoan. I explained that MyFedLoan told me this was a Direct Loan issue and that they couldn’t fix it. So, I asked if they could communicate with each other and was told that this would never happen.
At this point, I asked if I could speak with a supervisor or someone with the authority to help. When I was transferred and explained my situation for the third time, the supervisor said that he would “file a report” and that someone would investigate the issue. This sounded inadequate to me. I continued to ask questions regarding the purpose of filing a report, about when I could expect results, and about other reasons that could explain this issue.
Then, after well over an hour on the phone with three different people, he said, “It’s possible the check hasn’t cleared yet. Sometimes it can take longer than usual.” Sure enough, two days later, when I logged into MyFedLoan, all was right with my consolidation.
The Moral of the Story
Student loan consolidation can be very poorly organized. Sometimes double debt shows up, sometimes it’s because a check hasn’t cleared, and sometimes it’s because “they forgot to mail it.” This process can be a mess, and there is plenty of room for error. Thousands of your dollars are on the line, so pay close attention every step of the way.