What to Do When Your Student Loan Servicer Gives You Wrong Information

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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:

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.

The U.S. Department of Education and the CFPB offer access to an ombudsman.

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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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. 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.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
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Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
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Visit CommonBond
2.72% – 8.17%4Undergrad
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.