Dealing with student loans can make you feel like you’re starring in your own horror movie. So much can go wrong with your own debt management, but when your student loan servicer makes mistakes, a struggle can turn into a nightmare.
The worst student loan servicer horror stories can make your pulse race and palms sweat. So what can you do if your servicer makes a wrong move? Here are five common student loan servicer errors to watch for and the best weapons to fight them.
1. Disappearing student loans
Keys, socks, and wallets are items we’re used to misplacing or losing. But student loans that disappear? It happened to Emily Guy Birken, author of End Financial Stress Now.
“I logged on to my Federal Direct Loan Servicing (FDLS) account and found that my balance was $0 rather than the $12,000 I owed,” Birken said. But she knew the $0 wasn’t a free ride.
“I panicked,” Birken said. “I pay very close attention to my finances, and I could only imagine that the $0 balance represented some kind of mistake that I was going to have to spend time or money to fix.”
Why does student debt disappear? It happens most often when your student loans are sold to new servicer.
Servicers should let you know if your loans are transferred or sold, but there’s often a lag time between account closure and notification from your new servicer.
What’s more, you could end up not getting your bill if your new servicer doesn’t have your most current contact information or doesn’t do its part to notify you.
What you can do
If your student loans disappear, don’t panic (or celebrate) just yet. You’ll need to find your student loan, and you’ll still be responsible for repaying the debt.
Here are some ways to find your lost student loans:
- Reach out to your student loan servicer to inquire about what happened to your loan.
- Check the National Student Loan Data System to see if it has updated information on your transferred loans.
- Review your free credit reports to see if your old or new servicer reported the transfer to credit bureaus.
However, taking those actions might not end your nightmare right away. Even after Birken found out that her new servicer was the Missouri Higher Education Loan Authority (MOHELA), she couldn’t access her loan information.
“I was told that they did not yet have my account set up and they could not answer any questions,” Birken stated.
Once you make contact with your new servicer, be sure to follow up and continue your on-time payments. That way, you can avoid any nasty late fees or dings to your credit later on.
2. Misapplied student loan payments
Maybe you’re sending in extra student loan payments but your principal isn’t going down. Or your extra payments are mysteriously redirected to your student loan with the lowest interest rate.
Simply put, student loan servicers’ payment processing systems aren’t always set up to properly apply and direct extra payments beyond the monthly minimums.
So in the cases above, your servicer might be treating extra payments as prepayments and moving back your due date rather than lowering your principal. Or the servicer might be set up to automatically apply extra payments to pay down the lowest-interest loan first, costing you more in interest.
Birken had another issue with her payments. She had been paying $600 a month voluntarily but had her payment reduced to her $360 minimum just before her loans were transferred.
However, she said, “When MOHELA bought my loan, they recorded $600 as my minimum payment and would not allow me to change it back to the minimum I had with FDLS.”
What you can do
You have the right to tell your servicer how to apply any extra student loan payments, and the servicer has to follow your instructions. Write a letter outlining how you want extra payments to be applied (you can use the sample letter provided here).
“Being able to lay your hands on your original paperwork is also important,” Birken said. With her original paperwork from FDLS in hand, she was able to prove her minimum was $360 and get the payment changed.
Here are some record-keeping steps Birken recommends taking when you work with your servicer:
- “Document everything, including the dates that you speak to your loan servicer and what you discuss.”
- “Keep copies of canceled checks, screenshots of loan payments, and bank statements that show direct payments.”
3. Student loan balances that come back from the dead
Kaysie Garza is a former student loan borrower who had a big student loan scare. She worked hard to pay off her $30,000 student debt in just 19 months.
After making her last payment, she reviewed her account one more time. Strangely, her servicer claimed she still owed $1,000.
Through an accounting error, her student loan servicer had added an extra $1,000 to Garza’s balance. These mistakes aren’t common, but they can happen. And if you don’t prevent or catch them, they can cost you.
What you can do
Garza knew she didn’t owe that $1,000 – and she could prove it. She had regularly viewed her student loan account online, taking screenshots after each payment to track her progress.
These screenshots served as documentation that helped her prove the extra $1,000 was an error, and Garza was able to get it erased.
To give yourself similar protections, save copies of payment confirmations and monthly statements. Also, check your balance each month to make sure it’s correct.
Then, after you send in your last payment, make sure to request a student loan payoff letter that certifies you’ve fully settled your account.
4. Stalled application to adjust repayment
Changing your repayment plan through deferment or forbearance or by switching to an income-driven repayment plan can feel almost as painful as a torture scene out of “Saw.”
OK, I might be exaggerating – but only a little. Problems with applications for income-driven plans and deferment are among the top reasons borrowers complain to the Consumer Financial Protection Bureau (CFPB) about their servicers.
“Consumers complain about processing delays and inaccurate denials when submitting an income-driven repayment plan application to their servicer,” the CFPB stated in an April report.
“These complaints include documents being lost by the servicer, application processing times spanning several months, missed payment[s] towards loan forgiveness, and unclear guidance when enrolling into a new income-driven repayment plan,” the CFPB report added.
What you can do
First, make sure you do your part by sending in all documents needed to process your application. It won’t hurt to review the application a few times to ensure you’ve correctly included all data.
Next, don’t change your payments in the meantime. You won’t be able to stop payments or pay less until your application is processed and you’ve received confirmation that your payment adjustments are approved.
If you pay less before then, you could become delinquent and face consequences ranging from late charges to default.
Lastly, communicate regularly with your student loan servicer. Be proactive about checking on your application process until you’re certain it has been processed.
5. Errors in your student loan account
Errors in your student loan account information can result in a number of issues. These issues might range from something as benign as not having your most up-to-date information to something as serious as having the wrong name or birthdate listed.
Lorrie Cozzens, director of marketing at DroneAscent, ran into this problem.
After earning a master’s degree, she applied to consolidate her federal student loans. She checked up on her application regularly, but every time, she was told her servicer was still processing it. After six months of back-and-forth, Cozzens finally snapped.
“Look,” she recalled telling the loan servicer’s rep. “I don’t want my business with you. This [is] being forced. This process should have been over months ago. What on earth is the holdup?”
After reviewing her application, the representative found that Cozzens’ birth year had been mistyped as 1899 – she would have been 97 years old.
“If I am 97 and still paying student loans, I have failed at life,” Cozzens joked. “Please come up from wherever you are and take me out of my misery.”
The error was corrected, and her consolidation was processed.
What you can do
To prevent such errors, it might be helpful to regularly review your student loan accounts.
Make sure you review all account and contact information that’s listed when you log in to the online portal and on any email or paper communications you receive from your servicer.
If something’s amiss, make sure you contact your servicer to correct it right away.
When to take it to the next level
If the above strategies for resolving student loan servicer issues don’t work, it’s time to bring out the big guns.
The following options can help you escalate your concerns, hold your servicer accountable, and resolve the issue:
- Submit a complaint to the CFPB, which will document your issue and require your student loan servicer to respond within 15 days.
- Enlist the help of a student loan ombudsman, a neutral mediator the federal government employs to settle disputes between borrowers and student loan servicers.
- Refinance your loans with a new lender. Unfortunately, borrowers don’t get to choose their federal student loan servicer. But by refinancing, you can pick a private lender that has a reputation for being fair and offering a better customer experience.
Most importantly, make sure you’re being proactive and avoiding student loan mistakes. Don’t be the student loan borrower who ignores his or her issues instead of working to solve them.
Armed with the strategies above, you can vanquish your student loan debt once and for all.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 Month/Day/Year, 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 08/21/18. 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
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.
3 Important Disclosures for SoFi.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|