Sloan is the newest servicer of federal student loans. Unlike bigger servicers like Nelnet and MOHELA, Sloan will only handle one specific type of federal loans: commercial FFEL loans.
What does this mean for borrowers?
Dealing with a new servicer is always a headache, but by specializing in commercial PLUS loans, the hope is that servicer guidance will be more accurate.
Most importantly, if you have loans serviced by Sloan, the odds are pretty good that you are missing opportunities for lower monthly payments and earlier loan forgiveness. The key nugget of information is that commercial FFEL loans can usually be converted to borrower-friendly federal direct loans.
What are commercial FFEL loans, and why were they moved to Sloan Servicing?
The Federal Family Education Loan (FFEL) Program was created to help more Americans afford college. Students could borrow from a private lender, and the federal government guaranteed the loan would be repaid. In 2010, the government discontinued the program and stopped using banks and lenders as intermediaries between students and the federal government. Many of the loans created during this program are still commercially-held loans.
If you have loans with Sloan Servicing, you have commercial FFEL loans. In other words, you owe money to a third-party lender, but the federal government continues to guarantee the debt.
The good news in this situation is that commercial FFEL loans are still federal loans. Borrowers may have to jump through some hoops, but it is possible to transfer the debt away from Sloan Servicing and qualify for repayment plans like SAVE and forgiveness programs like Public Service Loan Forgiveness.
Enrolling Sloan Servicing Loans in SAVE and Public Service Loan Forgiveness (PSLF)
The problem with Sloan Servicing Loans is that they are commercial FFEL loans, and these loans are not eligible for PSLF or SAVE.
However, borrowers can consolidate the debt into a federal direct consolidation loan to gain eligibility. The consolidation process repays the commercial loan in full and creates a new loan funded by the federal government. For most FFEL borrowers this means eligibility for SAVE and PSLF.
Additionally, borrowers who consolidate before April 30, 2024, can maximize their credit from previous payment activity. In the past, consolidated restarted progress toward loan forgiveness. Right now, it can potentially speed up the forgiveness clock.
Exceptions for Parent PLUS and Spousal Consolidation Loans. Within the already complicated world of commercial FFEL loans, some loans are extra complicated.
If you have Parent PLUS loans, you can still consolidate to gain eligibility for PSLF, but you won’t be eligible for SAVE unless you use the double-consolidation loophole.
Spousal consolidation borrowers will need to wait for new regulations to be implemented before they can take any action on their loans.
Consolidation Tips for Commercially-Held Loans
Most borrowers will find that consolidating their commercially-held FFEL loans is the best approach.
Opting for a federal direct loan means fewer strings attached and more repayment and forgiveness opportunities. The one-time IDR count update also removes much of the guesswork for people who consolidate before April 30, 2024.
Consolidating their loans gives borrowers the unique opportunity to choose their loan servicer. Generally speaking, there is no loan servicer with a great reputation, and all loan servicers must follow the same rules, so there is no strategic advantage to choosing one over the other.
That said, at the time of this article, MOHELA hold times appear to be consistently longer than most other servicers, so choosing anyone else is recommended. Sadly, MOHELA is unavoidable for those pursuing PSLF. If you plan on pursuing PSLF, you should pick MOHELA, as they handle all PSLF borrowers.
When to Stick with Sloan Servicing
If most borrowers should consolidate their commercial FFEL loans right now, what is the exception to the rule?
The narrow exception right now is for people who have a premium interest rate on their loans. When some commercial lenders offered consolidation services, they also offered an interest rate discount to some borrowers. If your federal loan interest rate is extremely low, you may be receiving this discount. If you are unsure of whether or not you have a rate discount, call Sloan Servicing to ask.
The problem with consolidation for people with a rate discount is that the new direct consolidation loan will revert back to the statutory interest rate.
The interest rate change is an acceptable consequence for borrowers who desperately need SAVE or are pursuing PSLF. However, if you are likely to repay your loan in full without needing SAVE or PSLF, it could be preferable to stick with Sloan Servicing.
The ideal approach will depend on your other debts, loan balance, and financial situation.
Contacting Sloan Servicing
If you need to reach Sloan, their phone number is 833-597-5626.
Crucially, Sloan also offers borrowers the chance to contact them via email. When possible, communicating with lenders via email is ideal. The email form is available here.
