It’s Time for Student Loan Servicers to Clean up Their Act
By Consumers Union on Friday, September 12th, 2014
Are you currently paying back your student loans? If so, have you ever had problems dealing with the companies – called “servicers” – that process loan payments, provide customer service, and keep track of your paperwork?
Well, whether or not they’re helping you, they’re still getting paid – by the federal government. The Department of Education has contracts with a number of corporations – like Sallie Mae (now called Navient) and a few others – to outsource the work of overseeing federal student loans. These contracts with the Department are worth millions – and the Department just renewed them despite widespread concern from policymakers and consumer groups about the Department’s oversight of these companies.
Servicers have come under increasing scrutiny for frustrating student loan borrowers’ attempts to pay down their loans faster. For example, the Consumer Financial Protection Bureau (CFPB) has heard complaints from many borrowers who’ve tried in vain to pay more than the minimum each month, only to find their extra cash applied to interest – basically a waste of money. (This kind of thing would be illegal if it were a credit card, by the way.)
Borrowers have also complained that they are having trouble navigating all the different repayment plans out there, and that they get the runaround from customer service – two more problems that can keep borrowers from managing their loans to best meet their needs.
We think it’s high time for servicers to work with borrowers to help them succeed. It should be simple and straightforward to get information, fix problems, and get out of debt as soon as possible. The Department of Education needs to take action to require servicers to:
—create a clear, single point of contact for making complaints and fixing problems
—step in to offer more flexible repayment plans if a borrower makes 3 or more late payments
—credit any payments a borrower makes beyond the minimum amount to the highest-interest balance first
Do you have a student loan? Have you had trouble trying to fix problems or get answers from your loan servicer? If so, please share your story with us.