Help for Virginians victimized by student loan servicers

Tuesday, January 16th, 2018

Imagine paying $700 a month for 14 years on a student loan, only to watch its balance continue to rise.  Or making eight years of payments on a $28,000 debt whose balance remains unchanged.  Or being told your struggle to meet monthly payments can be put off, only to find out much later that doing so compounded your interest and you owe thousands more than you did before.  Or having your monthly payments doubled or tripled without your knowledge.  Or receiving nearly a dozen aggressive phone calls a day, threatening to take away your home and freedom if you do not pay a bill that you have already paid.  These are just some of the stories of those Virginians victimized by the illegal practices of student loan servicers.

On average, Virginians graduate college with nearly $30,000 in loan debt, and with a national default rate of 11.5%, Virginians are not alone in struggling to pay off this debt.  Complicating this issue are loan servicers that are consistently providing inadequate assistance to those seeking relief.  Servicers are meant to be the bridge between borrowers and lenders but instead are increasing borrowers’ payments through management errors and inaccurate information.

Recent claims detail that many of these servicers provide sloppy and disorganized customer service.  They fail to collect the correct amount, process payments on time and apply them correctly to borrowers’ accounts.  Additionally, borrowers are not being informed of their repayment options and are faced with higher fees as a result.  There is little accountability or consistency in the industry to regulate these practices that are harming so many.

Lawsuits like the one filed by the Consumer Financial Protection Bureau against Navient, one of these servicers, are exposing these issues.  CFPB’s claims detail that Navient repeatedly failed to correctly apply payments, gave incorrect information to consumers, and encouraged borrowers to pay more than they needed to on their loans.  Inadequate notification has led to borrowers failing to recertify for re-enrollment in income-based repayment plans.   This creates higher and often unaffordable monthly payments.  Additionally, borrowers have been directed towards forbearance which results in greater interest that could have been avoided.  CSPB also claims that Navient’s misrepresentation of disabled borrowers prevented them from qualifying for loan forgiveness, which subsequently hurt their credit.

These failures of not just Navient, but other servicers as well, coupled with the uncertainty created by the Trump administration’s planned approach to this issue, make the need for greater accountability and transparency even more critical.  Several bills in the 2018 General Assembly seek to do this.  Senator Janet Howell’s bill and Delegate Marcus Simon’s bill both seek to regulate loan servicing by requiring that a servicer obtain a license from the State Corporation Commission.  Delegate Marcia Price’s bill seeks to establish the Office of the Qualified Education Loan Ombudsman, a position whose responsibilities would include receiving and assessing loan borrowers’ complaints and helping them understand their options.  These bills are important steps towards solving this growing crisis.

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