Student loan debt is something many graduates find themselves saddled with for years, or even decades, after graduation. Unfortunately, this means they have to endure the occasional tango with student loan servicers, whether to determine monthly payment amounts, repayment plans or to address other questions and concerns that might arise over the life of a loan. The last thing on the minds of graduates and students alike is whether or not their student loan servicer is being honest with them and not trying to take advantage of them. Unfortunately, it seems some student loan servicers haven’t been playing nice lately, which prompted the Consumer Financial Protection Bureau to issue a warning on Monday to consumers to “pay close attention to their personal information on record with student loan servicers as errors are popping up that can cost borrowers dearly.”
Student loan debt is something many graduates find themselves saddled with for years, or even decades, after graduation. Unfortunately, this means they have to endure the occasional tango with student loan servicers, whether to determine monthly payment amounts, repayment plans or to address other questions and concerns that might arise over the life of a loan. The last thing on the minds of graduates and students alike is whether or not their student loan servicer is being honest with them and not trying to take advantage of them. Unfortunately, it seems some student loan servicers haven’t been playing nice lately, which prompted the Consumer Financial Protection Bureau to issue a warning on Monday to consumers to “pay close attention to their personal information on record with student loan servicers as errors are popping up that can cost borrowers dearly.”
This is pretty significant when you consider the fact that roughly 44 million Americans have student loans, and that the collective US student loan debt is somewhere around $1.3 trillion. But how did the CFPB learn that some student loan servicers are more prone to errors that are costing borrowers precious money that is already in such short supply for so many graduates? Well, they based their findings off of the thousands of consumer complaints they receive each year about “issues with student loan servicers.” Some of these issues even include “problems tied to incorrect or incomplete enrollment status information,” which can have a huge impact on a graduate’s repayment plan and how their student loan interest is calculated.
You see, “enrollment status tracks whether someone is enrolled in college or university and their expected graduation date.” It’s used to “determine when someone must begin repaying their student loans and how interest is calculated.” According to the CFPB, errors on the part of loan servicers are “costing some borrowers hundreds in additional interest charges, leading to unexpected bills, hurt credit reports and lost eligibility for other benefits.”
For example, students aren’t typically required to make student loan payments while enrolled in school, and even often get a grace period upon graduation before having to send in their first payment. The problem that is popping up for many is an error in the reporting system, often “triggered by a student leaving school temporarily, reducing the number of hours or transferring schools.” When errors like these happen, a student can see their loan go into repayment status before graduation, or their interest might accrue earlier than expected. Other graduates have reported a “lag time in reporting, which put them behind on payments before they even knew they were due.” Unfortunately for many, these errors aren’t typically resolved easily.
So what’s causing these problems to begin with? While student loan servicers certainly aren’t helping matters, many in the industry blame the problem on a “byzantine system of reporting.” What does that mean? Well, “colleges and universities are required to provide timely, accurate and complete information on enrollment status.” From there, the school or a third-party company sends the enrollment status information to the National Student Loan Data System. Errors occur when this information isn’t shared in a timely fashion, or if some other hiccup arises between point A and point B. According to Eileen O’Leary, financial aid director at Stonehill College, “there are a lot of players and a lot of places for it to fall apart.”
So how can someone avoid costly errors happening to them? For now, the CFPB suggests “consumers closely monitor their enrollment status, especially if they’ve recently left or returned to school.” Complaints can always be made to the CFPB for those who run into any troubles resolving issues.
Sources:
Watchdog Agency Warns Of Costly Student Loan Data Errors
How Student Loan Servicers Affect Tens Of Millions Of People
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