How To Deal With Common Student Loan Servicer Problems (Guest Post)
I haven’t written a lot about my student loan servicer, or the problems that come with the territory. Mostly, because I haven’t experienced it yet. Instead, I write a lot about my own journey with student loans, how much we’ve paid off, what it makes me feel like, the way we’re changing our budget to accommodate them. Up until recently, the loans were the sole object of our spare money.
However, I don’t spend a lot of time talking about actionable tips and tricks. I just write about my experience with them. That being said, Nate Matherson from LendEDU has some advice for us about dealing with Student Loan Servicers problems. Take it away, Nate.
If you have student loans, you have a student loan servicer.
If you’ve taken out private loans, the company you borrowed from most likely services your loan so you make payments to that lender and address problems or customer service issues with that lender. But, if you’ve taken out federal student loans, your loans will be serviced by one of a limited number of approved servicers including Nelnet, Navient, FedLoan Servicing, Mohela, HESC, CornerStone, Granite State, OSLA Servicing, or Debt Management and Collections System. And, you likely won’t have a choice about who services your loans.
Unfortunately, some federal loan servicers have been sued for providing false information about Public Service Loan Forgiveness; for steering students to costly repayment programs; for making risky subprime loans; or for other types of egregious misconduct.
If you’re having problems with your student loan servicer, it’s important to know what your rights are – and how you can protect your legal interests when dealing with a bad loan servicer.
Common Problems with Loan Servicers
Some of the most common problems you may face when dealing with your loan servicer include:
- Payments misallocated or misapplied
- Inaccurate advice about payment plan options
- Servicers improperly advising you to put loans into forbearance rather than use income-driven payment plans
- Failure of your loan servicer to provide correct information when you ask for help with high monthly payments
- Unexpected late fees
- Delays in processing payments
- Misrepresentation of repayment options
- Misrepresentation of amounts due
These problems can cost you money and can make repaying your loans a much more stressful and difficult process. For example, misapplied payments can lead to higher interest charges which adds up over the life of a loan.
How to Deal with Common Problems with Loan Servicers
You have a few possible options for coping if you’re having a problem with the company servicing your loans. Some of the steps you should consider taking include:
Researching your rights as a borrower
Don’t count on your lender to tell you which payment plan option is right for you or to make sure you’re fulfilling requirements for Public Service Loan Forgiveness (PSLF). Use the Department of Education website and other helpful online resources to learn about payment plan options, PSLF requirements, or deferment and forbearance so you can make informed choices. Or, talk with financial aid counselors at your school to help you navigate your loan repayment process.
Documenting everything
Carefully document every payment you make and all correspondence with the loan company. That way, you’ll have proof if you need to dispute a payment that was incorrectly applied or challenge an improper late fee. If you need to communicate with your loan servicer about any serious issues, also send your letter via registered mail. This ensures you receive documentation of the correspondence and proof it was received.
Keeping careful tabs on your loan
It is up to you to make sure your payments are applied on time and applied correctly. Check your online account and written statements each and every month and swiftly alert your lender if something doesn’t look right. Make your complaints in writing to the lender and, if you have any verbal communication, write down the name of the person you spoke to, the date of the conversation, and details you discussed.
Making a complaint
You can make a complaint about your loan servicer with the Consumer Financial Protection Bureau, as well as with your state’s Attorney General. Some states have also appointed a Student Loan Ombudsman to help handle borrower complaints.
Joining a lawsuit
There are several ongoing class action lawsuits against student loan servicers. If you have been victimized by a servicer and qualify to join, you could become part of an ongoing suit. This could allow you to recover compensation for damages without having to go to court on your own.
Contacting an attorney: If you’re being treated improperly by your servicer and cannot resolve the problem on your own, consider getting legal help. Pro bono legal aid societies in many states and affiliated with many law schools exist, so you could potentially get help at no cost.
Consolidating
You can obtain a Direct Consolidation loan with the Department of Education. This could potentially allow you to change all of your federal student loans to one new loan servicer. Obtaining a consolidation loan combines all eligible federal loans into one new big loan with a weighted interest rate – and you don’t have to give up protections such as income-based payment options that come with federal loans. Unfortunately, you’ll still be assigned a servicer after consolidating, and there’s no guarantee you’ll like your new servicer.
Refinancing
It is also possible to refinance both federal and private loans with a private lender. You do have to give up borrower protections to do this, but could potentially reduce your interest rate. You also get to choose which private lender you consolidate with. Look for a lender with a strong reputation for good customer service service, an important component of LendEDU’s Editorial Ratings. Companies that refinance student debt use a variety of servicing firms including Mohela and Navient.
Unfortunately, dealing with common student loan servicing problems is often a part of being a borrower. Be sure to protect your rights as you repay your loans and consider whether it makes sense to try to pay down your debt ASAP so you never have to deal with a student loan servicer again.
Nate Matherson, Co-founder of LendEDU, graduated with over $50,000 in student loan debt. Nate has repaid about 1/2 of his debt, and in the process has made payments to four different student loan servicing companies. He will always remember his first phone call to MyFedLoan, where within two minutes they tried to put him into forbearance.
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