New CFPB ‘Fix It Form’ Helps Borrowers Enroll in Income-driven Repayment Plans Without Confusion

New CFPB ‘Fix It Form’ Helps Borrowers Enroll in Income-driven Repayment Plans Without Confusion

The Bureau estimates that one out of four borrowers currently in default or scrambling to stay current on their student loans. As of the first quarter of 2016, about 5 million student loan borrowers were enrolled in an income-driven repayment plan. However, a recent government report noted that many eligible consumers with federal student loans are not taking advantage of the program, with many being driven needlessly to default on their loans. Application abyss: Generally, the income-driven repayment application process should take no more than two weeks. However, borrowers report that their applications sit under review for weeks or months at a time, leaving them to linger in an application abyss. These delays can cause borrowers to lose out on protections that can lower their monthly payment, save them money on interest charges, and start them on the path to loan forgiveness. Repayment rejection: Borrowers report being rejected because their application had missing information or because their servicer lost paperwork, without ever being notified by their servicer or being given a chance to fix the problem. Other borrowers report being rejected simply for checking the wrong box, without being given the opportunity to submit a corrected form. These errors discourage borrowers from restarting the application process, and some borrowers may choose to walk away from their loan, instead of remaining on the road to repayment. Recertification replay: For borrowers who successfully enroll in an income-based repayment plan, they may re-encounter the same obstacles each year since they need to certify their income and family size annually in order to keep an income-driven payment. Servicing practices related to recertification, particularly...
Student debt-relief companies don’t deliver on promises, study shows

Student debt-relief companies don’t deliver on promises, study shows

If students are armed with financial literacy classes, fewer will be tempted by companies that urge them to restructure their debt, experts argue. Every day, false promises of help lure in young college grads anxious to pay off their loans. So-called debt-relief companies make bold and sometimes misleading offers to the grads by charging for a service they could have easily performed themselves. One company offers “Obama’s new loan forgiveness program,” which doesn’t even exist. College grads who pay to get help consolidating their debt spend more than $600, on average, for a service they could be getting straight from their loan provider for free, according to a joint survey from personal finance site NerdWallet and the nonprofit Student Debt Crisis, released this week. Yet the complicated federal student loan system has given rise to a “student loan debt relief industry” in which for-profit companies aggressively and deceptively advertise their services.      “Lower your student loan payment, in some cases as low as $5 – $25!” advertises Student Loan Consultants of America, one of more than 200 firms that promise to help students burdened by student loans. It might appear to have been sanctioned by the US Department of Education, since it touts the official agency seal on its website. In fact, it has no affiliation, and received a cease-and-desist order earlier this year for wrongly using the government seal. Advocacy groups are raising a red flag that such for-profit debt relief companies are preying on the very people they claim to assist. “It is time for the federal government to reign in these private companies that take advantage of thousands of distressed student...
CFPB Finds Consumers Complain of Needless Hurdles in Applying for Student Loan Payments

CFPB Finds Consumers Complain of Needless Hurdles in Applying for Student Loan Payments

 CFPB Calls on Student Loan Servicers to Strengthen Practices, Publishes “Fix It Form” for Servicers to Adopt  WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released a report finding consumers complain of servicing problems that make it difficult to get lower student loan payments tied to their income. Student loan borrowers seeking to take advantage of income-driven repayment plans with their federal student loans complain to the CFPB about prolonged processing delays and wrongful rejections by their student loan servicers. These delays and rejections can result in increased interest charges and lost eligibility for certain federal benefits and protections. To help borrowers overcome these obstacles, today the CFPB is publishing a prototype “Fix It Form” that servicers can use to improve the level of service they provide. “Student loan servicers continue to fall short when it comes to helping borrowers address $1.3 trillion in student debt,” said CFPB Director Richard Cordray. “It’s time servicers focus more effectively on processing applications for income-driven repayment plans properly.” “Student loan servicing breakdowns can stack thousands of dollars of hidden costs on the backs of borrowers who can least afford them,” said CFPB Student Loan Ombudsman Seth Frotman. “Too many student loan borrowers are struggling to take advantage of their right to pay based on how much money they make. Servicers who want to better serve their customers can take the immediate steps recommended in this report to clean up this broken process.” The CFPB Student Loan Ombudsman’s Midyear Report is available at: http://files.consumerfinance.gov/f/documents/201608_cfpb_StudentLoanOmbudsmanMidYearReport.pdf Student loans make up the nation’s second largest consumer debt market. The market has...
Ads tout fake ‘Obama student loan forgiveness’

Ads tout fake ‘Obama student loan forgiveness’

If you have student loans, you may have seen advertisements online touting “Obama’s New Loan Forgiveness Program.” Companies using these advertisements offer to help borrowers — for a fee — apply for the government program to lower monthly payments and consolidate their federal student loans. Companies using these advertisements offer to help borrowers — for a fee — apply for the government program to lower monthly payments and consolidate their federal student loans. The problem is that the program doesn’t exist. Companies are charging unaware borrowers for assistance that they can receive for free on federal student loans from the Department of Education. “There’s no such thing as ‘Obama student loan forgiveness,’” said Andy Josuweit, co-founder and CEO of Student Loan Hero, a website that provides free tools to help borrowers manage their debts.   Regulator action Nine percent of student loan borrowers have used debt-relief companies, according to a recent survey by borrower advocacy group Student Debt Crisis and personal finance website NerdWallet. Consumers who used student loan debt-relief services paid an average of $613 for income-based repayment plans and loan consolidation that they could receive at no cost from the federal government, the survey found. Sixty-five percent said the services did not improve their financial situation, according to the survey.     Sixty percent of the 6,363 borrowers surveyed had seen advertisements for student debt-relief firms and 44 percent were pitched directly by the companies. Among borrowers who had seen ads for student debt relief, more than two-thirds were familiar with “Obama’s New Loan Forgiveness Program.” Continue Reading at...
A New Report Sheds Light on Profiteering by So-Called Debt-Relief Companies

A New Report Sheds Light on Profiteering by So-Called Debt-Relief Companies

 Finally, a clear picture of how student-debt-relief companies take advantage of loan borrowers.  Using deceptive ad slogans like “Obama’s New Forgiveness Program” and “We Work for the Department of Education,” private companies are charging student-loan borrowers for services that falsely claim to provide debt relief, forgiveness, and consolidation. The pervasiveness of these so-called debt-relief companies is a growing problem for millions of borrowers—a problem that gets far too little attention. In July 2016, Student Debt Crisis and NerdWallet conducted a survey of customers of privately operated student-debt-relief companies in an attempt to shed light on their abusive profiteering. Prior to this survey, advocates, experts, and legislators remained largely in the dark about their predatory practices. Survey results from 6,363 respondents discovered that the average borrower paid $613 for private debt-relief services that are, in fact, offered for free by student-loan servicers and the Department of Education. Sixty-five percent said their financial situation was not improved. Those who paid for student loan debt relief, forgiveness, or consolidation services reported high prices and abysmal satisfaction, confirming that these companies are generating massive revenue for assisting borrowers with something they can easily do themselves through free programs. It doesn’t stop there. One-in-four borrowers are contacted directly by these companies on a weekly basis. Such frequency highlights… Continue Reading at The...