In the past few months, the U.S. Department of Education – headed by Secretary of Education Betsy DeVos – has made two significant changes:
- It has rolled back protections that hold student loan servicers accountable to work in the best interests of borrowers.
- It eliminated the 60-day grace period that prevents borrowers from being charged a default fee, even if they promise to make good on their debts.
Without these protections, many student loan borrowers are on their own. These changes, as well as ongoing issues, have caused complaints about loan servicers submitted to the Consumer Financial Protection Bureau (CFPB) to skyrocket.
Common complaints against student loan servicers
The complaints the CFPB has been receiving from borrowers expose significant issues within the student loan system. A new report from the CFPB highlights the breakdowns and communication issues among loan servicers. These are some of the most common problems:
1. Servicers do not inform borrowers of their options
Many borrowers who could not keep up with their payments contacted their loan servicers to find out about their repayment options. However, servicers frequently did not inform borrowers of their options, such as income-driven repayment plans, deferment, or forbearance. This caused many borrowers to end up delinquent or in default.
Moreover, for those who were on income-driven repayment plans, servicers did not inform borrowers that they had to reapply annually. That caused many to miss important deadlines and lose out on the reduced payment they had.
2. Processing errors
The CFPB found that loan servicers regularly made mistakes and gave borrowers incorrect information. For example, some servicers failed to refund interest charges or late fees even after borrowers informed them of the error. Those charges compounded, causing the borrowers’ loan balances to balloon.
Those who had loans discharged by the government also found themselves reported as in default. Even though loan servicers lawfully forgave borrowers’ loans, they still erroneously sent negative data to the credit bureaus, damaging borrowers’ credit reports.
A huge increase in complaints
In just three months, the CFPB has had a staggering 325 percent increase in complaints. They received 3,284 complaints in 2017 versus only 773 complaints during the same period last year.
The CFPB says the increase is due to a wide range of factors, from the loss of borrower protections to the enforcement action the CFPB initiated against Navient. And when it comes to student loans, the CFPB says Navient receives the most complaints.
What you can do to protect yourself
It’s important that you not assume your student loan servicer is working in your best interest. It’s up to you to find the necessary information you need to manage your student loans. Here are three ways you can protect yourself from misinformation and errors:
1. Keep detailed records
When dealing with student loan servicers, make sure you keep your loan information organized. Know who your loan servicer is, how much the total loan balance is, and what your payment is each month.
If you are disputing information with your lender, keep detailed logs of every conversation you have. Having that documentation can help you if you get different responses, or if the servicer agrees to fix your problem and doesn’t follow through.
For conversations via email, save copies of each correspondence in a separate folder. And for those who talk to the servicer on the phone, keep a log with the date, time, and loan servicer representative’s name for each call.
2. Know your repayment options
If you are struggling to keep up with your payments on your current salary, being aware of your repayment options can prevent you from entering into default.
One option is applying for an income-driven repayment (IDR) plan. While there are four types of IDR plans, the essentials are the same: the government caps your payments at a percentage of your discretionary income and extends the repayment term. That approach can dramatically reduce your payments and make it easier to pay the minimum each month.
If you’re facing a financial hardship, such as a job loss or medical emergency, you may qualify for forbearance or deferment. Under these options, you can postpone your payments for months or even years without going into default. While not ideal because interest continues to accrue on your debt, entering forbearance or deferment can give you the time you need to get back on your feet.
If you have private student loans, find out if your servicer offers similar benefits to the federal options outlined above. If not, you might consider refinancing with a better company.
3. Log a formal complaint
If your loan servicer is not working with you to solve issues, such as discrepancies with your loan balance, you can file a formal complaint. You can contact the CFPB online or call 855-411-2372. The CFPB will work with the loan servicer on your behalf to solve the problem.
After exhausting your other options, you can also contact the student loan ombudsman to help reach a resolution. A student loan ombudsman is a neutral third-party who will work with you and your servicer to identify the problem and a solution.
Managing your student loans
The new data from the CFPB shows how difficult it can be to deal with student loan servicers. Don’t rely on your servicer for information about your debt. Stay informed of borrower protections and advocate for yourself.
If you need help finding a repayment plan, forgiveness program, or refinancing offer, we can help you manage your student loans for free.
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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 email@example.com, 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|