Many Credit.com readers know all about getting the runaround from their student loan servicers. One reader, William, is trying to find more information about income-based repayment. But everywhere he goes, someone seems to pass the buck.
“It is hard to find answers to many of these questions,” William wrote in response to a Credit.com op/ed on student loans. “The [Department of Education] website is not clear. If you call them, they tell you to call your school. The school tells you to call your servicer, the servicer tells you to call the DOE.”
William is not alone in his fruitless search. Many people who borrow money to pay for education are having similar problems with the companies that service their loans, according to a recent report by the Consumer Financial Protection Bureau. Throughout the cycle of a loan, from understanding how much one owes to processing payments correctly to attempts at refinancing, student loan servicing companies, servicers place roadblocks in borrowers way that could lead to serious financial problems for borrowers, the report found.
Many of these problems bear an “uncanny resemblance” to the ones discovered in recent years in the mortgage service industry, says Rohit Chopra, author of the report.
“Graduates don’t have a fair chance to pay back their debts if they are faced with surprises, runarounds, and dead-ends by student loan servicers,” CFPB Director Richard Cordray said in a press release. “These young consumers are facing serious challenges in dealing with their debt, which can hold them back from getting ahead in life.”
The report is based on 2,900 complaints filed with the bureau since March concerning student loan servicers. It found that confusion over the terms of loans often starts as soon as students graduate, when many are not informed about fees or when payments are scheduled to start.
Borrowers also had a difficult time getting their payments processed before the due date. When they try to get these and other questions answered, many borrowers said they had a difficult time tracking down their servicer and getting help. Servicing issues accounted for 65 percent of all complaints.
Finally, graduates and former students who wind up in financial trouble say they are surprised to find that their private loans offer few of the options for deferred payments, forbearance, or need-based lowering of their interest rate that they receive from their government loans.
The complaint data confirms what Credit.com’s consumer experts have known for years.
“We get complaints all the time from borrowers who can’t find out what’s going on with their loans and can’t get the info they need to fix problems,” says Gerri Detweiler, Credit’coms consumer credit expert.
How about you? Are you finding it hard to understand your student loan terms, reach your servicer or get your payments processed correctly? You can file a complaint with the consumers bureau. And we welcome you to comment on our forums or ask a question to Detweiler.
Image: Mr. Thomas, via Flickr