The House subcommittee in charge of education took a look at the shortcomings of the student loan servicing system Wednesday, with the focus on a critical report from a key government watchdog and concerns over delays to long-planned reforms.
In the subcommittee’s first hearing on student loans since the Democrats took control of the chamber this year, Chairwoman Rosa DeLauro (D-Conn.) said the Department of Education (DoED) had been “asleep at the wheel,” and that in addition to the national student debt crisis, the country is also suffering from a “servicing crisis.”
The top of the agenda involved the department inspector general’s report, issued last month, that said the Federal Student Aid office had been lax in policing student loan servicers. As a result, the report said, servicers had too frequently failed to inform borrowers about all of their repayment options and miscalculated payments in Income-Driven Repayment plans, among other issues.
In testimony to the subcommittee, Assistant DoED Inspector General Bryon Gordon said Federal Student Aid had found servicers to be “noncompliant” 61% of the time when monitored in 2015-17, yet it hadn’t done enough to track these issues or hold the servicers accountable.
The lawmakers also discussed long-standing ambitions to reform student loan servicing under a new Next Generation Financial Services Environment, commonly known as “NextGen.”
NextGen would combine the current system of nine federal student loan servicers into a single platform, and Gordon said Federal Student Aid believed this would “put them in a position to address some of the issues” in the report.
But the NextGen plan has been slow in coming. The DoED had said in 2017 they hoped to roll out the system this year, but Gordon told the subcommittee that “they’re still early on in the planning for that.”
However, Colleen Campbell, the director of postsecondary education at the Center for American Progress, was more explicit.
“That [NextGen-building] process has been going on for years now and will continue to be delayed, I’m sure, if servicers and debt collectors have any say in it,” she told the subcommittee. “We can’t wait for these changes. They have to happen now, and you can compel the Department of Education to do them right at this moment.”
Despite the problems with the current system outlined during the hearing, know that you have ways to push back if you feel your servicer has misled you or failed to inform you about your federal student loan options.
If any of these situations apply to you, or if you believe you’re paying more than you should be, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). Although the CFPB has come under recent criticism for alleged inaction, it’s still worth taking this step, at the very least to officially record your problem.
If your situation is more severe, meanwhile, you can also reach out for help from a student loan attorney or credit counselor, some of whom will help you for free if you can’t afford it. Also note that there are ways to change your student loan servicer if you’ve had enough of your current one.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|