Among its many duties, the government’s Consumer Financial Protection Bureau aims to help consumers make smart borrowing decisions. The CFPB solicits borrower complaints on federal student loan servicers as part of its work.
These companies, such as Navient Solutions or Nelnet Inc., collect payments, respond to customer service inquiries and perform other administrative tasks associated with maintaining loans on behalf of the U.S. Department of Education.
A recent publication from Quartz used the CFPB’s data to show the most common complaints that borrowers make against these companies. The issues with servicers ranged from mishandling payments to providing bad information, to name a few.
Since student loans have complicated terminology and strict regulations, it can be difficult for borrowers to tell whether their servicer is a bad actor. Sometimes servicers fail to follow regulations, and other times borrowers don’t communicate their needs correctly.
The Student Loan Ranger often tells borrowers who are struggling with their payments to work with their student loan servicers — they’re there to help. This advice may seem obvious, but many may need that reminder since they’ve encountered poor customer service experiences in the past.
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While it’s good to know how to file a student loan complaint and when to speak up for your rights as a borrower, it’s better to know how to avoid situations that lead to complaints in the first place. Here are the most common student loan complaints along with advice on how borrowers can avoid these issues.
1. Mishandled payments: Federal law requires student loan servicers to apply payment amounts in a specific order: outstanding fees, accrued interest and then principal balance. If you overpay on your loan, the servicer won’t roll that extra amount automatically toward your principal balance — it may apply the amount toward your next payment instead.
If you make overpayments online, federal loan servicers should ask how you want the money to be applied. But if you mail a check and fail to include specific instructions, the servicer’s default behavior will be to apply it toward your next payment.
To ensure payments are applied to your account correctly, it’s best to understand how they’re processed and tell your servicer how you’d like the extra amount to be applied. The Ranger advises borrowers to check their account statement every month to catch potential issues when they arise.
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2. Received bad information: You are responsible for the repayment of your loan. If you have questions about available options, research them before calling your servicer. A wealth of student loan information is available online. To avoid inaccurate sources, it’s best to stick with websites that are from the government or nonprofit organizations.
Once you know your options, you’ll be better prepared to avoid bad or incomplete information from your servicer.
For instance, if you can’t afford to pay your bills, the servicer may suggest forbearance — even if you qualify for a deferment. While both are paths of relief if you’re having trouble with payments, a deferment could cost you less money depending on your situation. By understanding these two options, you’ll be able to direct the conversation and find the best solution.
If the servicer tells you something that doesn’t align with your research, write it down and look it up again. Don’t feel forced to make an immediate decision over the phone — especially if the information doesn’t sound right to you. Remember, you can always call back or ask to speak to someone else.
3. Couldn’t reduce payments or get flexible payments: The Ranger has combined two common complaints, as for many borrowers getting flexible payments likely means reducing their payment amount.
If the servicer doesn’t mention flexible repayment options, such as an income-driven repayment plan, the borrower may feel he or she is not eligible. Borrowers can avoid this by learning about the different repayment plans and which they might qualify for on their own.
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Borrowers may also face these issues if their loans are in default. At this point, the loan becomes due in full and borrowers lose access to flexible repayment options — plans that would otherwise reduce their payments.
This may seem unreasonable to borrowers, especially if they’re struggling with their loan payments. In this instance, filing a complaint probably won’t achieve the desired result. Instead, these borrowers need to take advantage of the options they have to remove the loan from default that would allow them to regain access to different repayment plans.
4. Didn’t agree with fees charged: Federal student loans don’t have repayment fees until you start missing payments. At that point, servicers can charge late fees. If you miss enough payments that the loans default, they can add collection costs of up to 25 percent of the loan’s balance to what you owe.
The best way to avoid these fees is to make your payments on time, every time. Enrolling in auto-debit payments allows you to ensure this happens.
As a bonus, some servicers offer an interest rate reduction if you enroll in auto-debit payments. For instance, Nelnet reduces the interest rate by 0.25 percent for eligible borrowers.
If you think you’ll be unable to make your payments on time, reach out to your servicer beforehand. The servicer can walk you through different options to help you stay on track.
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How to Avoid Common Student Loan Complaints originally appeared on usnews.com
