Experts concerned about student loan servicing failures
RICHMOND, VA (WWBT) - Companies handling student loan payments are making a range of errors, according to a report from the Consumer Financial Protection Bureau.
The bureau says it has received thousands of complaints and says the problems are similar to what happened in the mortgage crisis.
One in four borrowers are now in default or struggling, but the CFBP says it's not all because borrowers aren't making enough money. It say the problem is also due to some of the companies that collect payments, known as loan servicing companies, giving borrowers the run around.
"Those range from lost or misapplied payments, surprise fees, or just getting bad information in terms of how they should pay off their student debt," explained Seth Frotman, Deputy Assistant Director of the Office for Students with the CFPB, He says some companies aren't helping consumers get into or stay in income-driven plans, such as the Income Based Repayment plan or Pay As You Earn plan, when they're eligible and would qualify for lower monthly payments.
NBC12 contacted the four top companies contracted by the U.S. Department of Education to service student loans about these allegations. Only Navient Corp. responded by offering a a statement saying its customers are 38 percent less likely to default and that they "promote awareness of federal repayment plan options through more than 170 million communications annually."
But the CFPB is cracking down. It says in July Discover Bank agreed to pay $18 million for what the CFPB calls illegal student loan servicing practices, ranging "from incorrect billing statements that overstated the amount borrowers owed, to harassing phone calls."
The CFPB, the U.S. Department of Education, and the Department of the Treasury just issued new guidelines for the student loan servicing industry, but consumer advocates say consumers should still take responsibility for watching over their accounts and pursuing alternative repayment plans if they can't make payments.
"You have to watch every single monthly bill, every statement that comes in, just to be sure your payment got credited," advised Tom Gallagher, President of the Better Business Bureau,
For borrowers struggling to make loan payments, the CFPB encourages you to use their recently updated Repay Student Debt website. Users simply click on answers to questions about the type of loan they have, whether they're behind on payments, and whether they're active in military service. The site will tell you whether you might qualify for lower payments through income-driven plans, which you can then apply for directly online.
Borrowers having problems with a loan servicing company can also file a complaint with the CFPB directly through the site.
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