Content on Demand for Special Sections and Niche Publications
A spate of student-loan complaints is shining the spotlight once again on the middlemen in a labyrinth known as the loan servicing industry.
Officials with the federal
Loan servicers are generally paid by the lenders to manage loan repayments and communicate with borrowers. More than 40 million consumers have accumulated about $1.3 trillion in outstanding federal student loans, according to the latest figures.
The loan servicing industry in recent years has been the subject of thousands of complaints annually from college borrowers over a range of payment service problems. Moreover, the
The latest report from the consumer agency did not single out any servicing company. But the findings indicate serious issues with paperwork and communication - namely "incomplete, inaccurate or untimely" enrollment status information.
Errors in enrollment status can be disruptive because this tracks when you enrolled in college and your expected graduation date. This information also helps determine when the clock starts on repaying your loans and sets how student loan interest charges are calculated.
Bad information about enrollment status can cost borrowers hundreds of dollars in additional interest charges, damage credit ratings, hurt employment prospects and lead to unexpected loan bills and lost eligibility for other student loan benefits, the report said.
Student loans generally cycle through three stages. The first is "in school" status, during which repayments are not required as long as the borrower is enrolled in school at least part time. During this time, borrowers also are not responsible for interest charges. Once a student leaves school or attends less than part time, many federal and private loans transition into a "grace period," generally six months, when no loan payment is due.
After six months of grace, the loans enter the payment phase.
In the consumer agency's report, borrowers complained about errors that prompted them to make "costly payments they should not have had to make." Others mentioned surprise late fees, damage to their credit and even inaccurate information being added to their loan file after other problems had been spotted and corrected.
Student borrowers also described roadblocks in getting errors corrected. For example, the federal agency said, these borrowers "described a series of unsuccessful encounters with different personnel, including staff at their college, the customer service representatives at their college's enrollment reporting company and their student loan servicer's customer service staff."
The upshot of the report: College loan borrowers need to monitor the information on file with their loan servicing company.
To avoid problems, the
And finally, if something doesn't look right, tell your servicer immediately. Explain what you think is wrong and why. If you're still having problems, submit a complaint to the
A few thousand complaints from college loan borrowers may not seem like a big deal, especially when you consider that loan servicing companies handle millions of accounts in routine fashion. But when the mistakes have serious financial consequences for borrowers, improvement in service and simple communication should be the least to expect.
ABOUT THE WRITER
(c)2017 The Kansas City Star
TO SUBSCRIBE TO THIS COLUMN
This column/content is for subscribers only. It is sold separately and is not included in your
You have 0 items in your Shopping Cart