Feds Investigating Student Loan Servicing
There are roughly 40 million student borrowers in the U.S. that are working to pay off $1.2 trillion in federal and private student loans. About 8 million of those borrowers are in default and about 4.3 million are in forbearance.
All borrowers rely on their loan servicer for information about their loan, to apply for forbearance, to get qualified for different repayment plans, to get qualified for a discharge, etc. “Loan servicers are the middlemen between the borrowers and all that debt — they’re the companies that process payments and serve as contact points for borrowers.” These servicers are especially important for defaulting student borrowers who need information and help on their student loans.
Unfortunately, the CFPB has noticed that many student loan servicers are acting negligently and not helping students. Here are the common problems the CFPB has identified:
– Payment processing delays that result in extra interest charges for borrowers.
– Barriers to early repayment, including failure to apply extra payments to the borrower’s highest-interest loans or divvying up less than full payments across loans to maximize late fees or other penalties.
– Failure to resolve billing or other disputes.
– Hurdles for distressed borrowers, including getting accurate information about repayment programs that could help them get current.
– Disconnects that keep borrowers from getting help lenders advertised to sell the loan, such as interest-rate reductions for auto-debit programs.
– Demands for payment in full upon the death of a co-signer.
If you are experiencing any of these problems, file a complaint with the CFPB. They want to know about it and take action.
Kevin Fallon McCarthy
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