It’s Time to Regulate the Companies That Service Our Student Loans
Tuesday, January 29th, 2019
Student loans make up the nation’s second largest consumer debt market. Over one million Virginians owe $39 billion in student loan debt.
Most student loan borrowers have a servicer assigned to their loan. Servicers are a critical link between borrowers and lenders. They manage borrowers’ accounts, process monthly payments, and communicate directly with borrowers. When facing unemployment or other financial hardship, borrowers rely on their student loan servicer to help them enroll in alternative repayment plans or request a modification of loan terms. A servicer is often different from the lender, and borrowers typically have no control over which company is assigned to service their loans.
Unfortunately, student loan servicers have a history of failing borrowers. In 2017, the Consumer Financial Protection Bureau (CFPB) sued the nation’s largest student loan servicer, Navient. “For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” said CFPB Director Richard Cordray. “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them, and today’s action seeks to hold them accountable.”
Other recent lawsuits against Navient and other servicers include: teacher’s unions suing Navient for misleading borrowers about PSLF; California suing Navient for widespread deception of student loan borrowers; Mississippi suing Navient for illegal practices related to student loan servicing; and New York settling with another student loan company, ACS, for $9 million related to mishandling military benefits like the Servicemembers Civil Relief Act and protections for public servants.
As Governor Northam said in his state of the commonwealth address, “It is high time we began regulating the companies that service our student loans. While people many not be able to avoid taking on debt to get an education, they should be able to count on basic consumer protections.”
Two bills before the 2019 Virginia General Assembly, HB 1760 (Delegate Simon and Delegate Price) and SB 1112 (Senator Howell), require student loan servicers to obtain licenses and properly apply payments to loan balances, give borrowers accurate information, and report accurate information to credit bureaus.
Alexandria Bratton, a Hampton resident and former student, knows the importance of these bills firsthand. “. . . My total [student loan] bill was roughly $45,000. It was a lot, but with my full time job, I felt like I could handle it with my monthly payment being around $800 per month. Only a few short months into my repayment, my monthly total owed shot up to right under $1,300 per month . . . Little did I know five years and about $40,000 later, I would still have questions as to where this loan came from and when it was dispersed because after countless phone calls, written letters, and emails, the company who I owe now almost $68,000 to doesn’t deem me respectable enough to warrant a response to me requesting my loan origination paperwork,” said Bratton.
“We know how important getting our degree is, and most of us are willing to do anything to do so. When we call and ask questions, we deserve answers—not snarky remarks telling us we knew what we were getting into from the customer service representatives. We deserve better. [These bills] would assist with me getting the answers I have been looking for [for] years, and it would allow students in Virginia to finally have some protections against predatory student loan [servicers].”