It’s hard to know where to turn for accurate student loan information. A recent federal government report said some student loan consultants hired by schools to provide counseling to borrowers might be giving bad advice.
Perhaps you should go to the source, right? Your student loan servicer should have all the info. That’s what Ingrid Haftel thought and did — until she realized her student loan servicer had been giving her wrong information.
That misinformation resulted in five years’ worth of payments essentially being wasted, money that Haftel assumed was going toward Public Service Loan Forgiveness (PSLF).
Can you trust your student loan servicer?
“I thought my servicer had the right answers,” Haftel said. “I had talked to them more than once about my eligibility for PSLF, and they told me I was on track.”
In addition to asking her servicer if she qualified for the program, Haftel filled out the employer certification form on its recommendation.
Unfortunately, Haftel didn’t realize her student loans were part of the Federal Family Education Loan (FFEL) program and therefore ineligible for PSLF. No one she talked with at the servicer told her that her loans didn’t qualify, and there was nothing on her servicer’s website to indicate that she had FFEL loans instead of Direct Loans.
It’s not just student loan borrowers working toward PSLF who were misled. Complaints about student loan servicers include:
- Lack of information about income-driven repayment
- Student loan processing errors
- Failure to help borrowers understand their options when coming out of default
This wrong information might not be intentional, according to student loan lawyer Jay Fleischman.
“Most borrowers are talking to a customer service representative who’s low on the totem pole,” Fleischman pointed out. “It’s really probably more of a training and education issue. Of course, that doesn’t let the student loan servicers off the hook. They need to provide better training for their employees.”
You can make choices that are only as good as your information, Fleishman said, and so far, loan servicing companies haven’t been held to account for leading borrowers astray.
Should you sue your student loan servicer?
During the past year, some borrowers decided to sue student loan servicers for compensation related to various issues. The Consumer Financial Protection Bureau (CFPB) has filed lawsuits against some companies, as have some state attorneys general.
“I thought about seeing if I could join a class-action lawsuit against my servicer,” Haftel said. “But there weren’t any such lawsuits pending against my servicer, although there are some against other servicers.”
She also considered suing her servicer on her own or checking if she could find a lawyer to start a class action. In the end, though, she decided it wasn’t worth the hassle.
Fleischman agreed. “In most cases, most of the money from a class action just goes to the attorney,” he said. “The borrowers only see a very small amount of it.”
When the government sues a servicer, it could result in big enough fines to force a change, but individual borrowers aren’t likely to see an immediate benefit, he said.
It’s possible to see better results when you sue a servicer on your own, but the process can be difficult and the outcome can be uncertain.
“Unless you can prove a certain amount of malice or that the servicer messed up in a major way, you probably won’t get much relief,” said Fleischman.
Instead, he urged that student borrowers should work to educate themselves. “I wish I could say servicers provide good information, but they don’t. It’s up to you,” he said.
How to protect yourself from wrong student loan information
“The best inoculation against misleading information is knowledge,” said Fleischman. “Before you talk to your servicer, do your research.”
That research probably can’t be done on your servicer’s website, as Haftel discovered. She found she was ineligible for PSLF only after logging into the National Student Loan Data System (NSLDS).
Once she accessed the NSLDS database and saw that her loans were from the FFEL program, she did more research and discovered that they weren’t eligible for PSLF.
“I got my loans just before the FFEL program ended, but after PSLF started,” Haftel said. “I didn’t realize going in they wouldn’t qualify. No one was clear about it with me at the time, and I was misinformed by my servicer since.”
Looking for information before talking to your loan servicer is important for other questions you have as well.
“Too often, servicers just put borrowers into forbearance, rather than taking the time to help them understand income-driven repayment,” said Fleischman. “They end up with unnecessary fees and they pay more interest as a result.”
If you can’t afford your student loan payments, Fleischman recommended learning about income-driven repayment plans before talking to your servicer.
“Rather than asking your servicer about options, go to the servicer and tell them what payment plan you want to go on,” he said. “They can help you verify that you qualify and get you squared away, but don’t expect them to volunteer any really useful information.”
Another option is to talk to a student loan ombudsman about your situation. The ombudsman is a neutral resource that can help you reach a resolution with your servicer, based on the facts of the case.
Consider refinancing your student loans
Because of the misinformation she received, Haftel ended up in a repayment plan that lengthened her loan term and resulted in more interest charges — without the prospect of loan forgiveness after 10 years. Starting over again with a PSLF plan doesn’t feel like the right move to her.
“I’m working on refinancing my student loans,” Haftel said. “I should be able to get a pretty good rate and an affordable payment.”
She is hesitant about it, though, because she’s worried about losing consumer protections such as access to income-driven repayment and other federal (and some state) forgiveness programs in the future.
Fleischman said refinancing your student loans can work if you have good credit and a high enough income to qualify.
“It’s one way to move forward and potentially save some money,” Fleischman said. “But remember that a private loan servicer might not be any more forthcoming than a federal loan servicer. No matter what, you are your best defense. You need to be vigilant.”
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