I hate student loans.
Don’t get me wrong. I’m grateful for the education that those loans afforded, but I despise the paperwork, the hassle, and the never-ending interest which make paying off student loans such a herculean task. Student loans represent some perverse never-ending form of bondage.
And nearly 44 million Americans are in this financial bondage to a tune of nearly 1.4 trillion dollars.
Why They Aren’t Trustworthy
That’s why recent headlines regarding student loan servicers are especially infuriating. These companies with names like Navient, Nelnet, MOHELA, and Great Lakes Educational Loan Services act as middle men between the student loan lenders (federal government and private banks) and the borrowers. Their job is to collect and keep track of payments and help you select payment plans that fit your financial circumstances.
But often they are accused of providing terrible service, giving inaccurate advice, and making mistakes that affect borrowers financial futures. One particular egregious example is Navient.
A spin-off of Sallie Mae, Navient is the nation’s largest student loan servicer with more than 12 million borrowers and $300 billion in loans under management. On January 18th of this year, Navient was sued by the Consumer Financial Protection Bureau (CFPB) for systematically deceiving borrowers. In a CFPB press release, CFPB Director Richard Cordray charged that:
“For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”
Navient is accused of a wide range of misdeeds. The company, for instance, did not correctly allocate borrowers’ payments to their accounts. These errors were often not corrected unless a customer discovered and pointed out the error to Navient. The company failed to adequately inform consumers of the need to renew their enrollment in special payment plans causing the consumers’ monthly payments to jump by hundreds of dollars. Navient erroneously reported many borrowers to credit reporting agencies, causing damage to their credit reports
In a particularly egregious offense, the company encouraged struggling borrowers to seek forbearance on their loans instead of enrolling them in the more financially advantageous income based repayment plans. Forbearance allows borrowers to take a break from making loan payments but interest continues to pile up on the loan. Income based repayment plans, on the other hand, can reduce a person’s monthly payments to 10% of their income, making the loans much more bearable. Unfortunately, Navient made more money when customers entered forbearance as opposed to an income based repayment plan.
Navient created an uproar when they responded to the CFPB lawsuit by claiming, “There is no expectation that the servicer will ‘act in the interest of the consumer’”. In essence the company claimed that they were simply an agent of the lender (U.S. government or private bank) and had no fiduciary responsibility to work in the borrower’s best interest.
Ironically this runs in direct contrast to Navient’s marketing which claims that Navient is there to help you navigate the student loan process. The CEO even professed that, “At Navient, our priority is to help each of our 12 million customers successfully manage their loans in a way that works for their individual circumstances.”
So what can you do when your student loan service provider claims their job is to help you, but then fail to work in your best interest? What can you do when your student loan servicer can not be trusted?
1. Document and keep track of everything
It is critical that you document every encounter with your student loan servicer. Log all phone calls and keep detail notes of your conversations. Retain all email and snail mail correspondence between you and your loan servicer. Do not misplace promissory notes, bills or cancelled checks which could be used to identify errors made by your loan servicer. Finally, make sure to use certified mail with return receipt for all mailed correspondence.
2. Keep track of your loans
You can use the National Student Loan Data System to keep track of your loans. Keep all documents to show what payments you’ve made.
3. Check your credit report
It’s always a good idea to check your credit report to make sure no derogatory or inaccurate information has been placed on your report by a loan servicer. You can get a free copy of your credit report annually by visiting AnnualCreditReport.com
4. Understand your options
As seen with Navient, your loan servicer may not have your best financial interests at heart. That’s why you must understand the best financial options for your situation. You can visit the Consumer Financial Protection Bureau Repay Student Debt Tool which offers a step-by-step guide to navigating your repayment options. In addition, the US Department of Education Federal Student Aid website is full of information to help you make the best student loan repayment decisions.
5. Get help when needed
If you have a dispute with your loan service provider over a federal student loan, the US Department of Education has a checklist which you can use to try to resolve the problem. If you need further assistance, even after having tried to resolve the issue with your loan servicer, you can contact the Federal Student Aid Ombudsman Group which is a neutral and confidential resource to help resolve problems with federal student loans.