In a recent report issued by the Consumer Financial Protection Bureau, student loan borrowers are experiencing high levels of distress compared with borrowers with other types of consumer debt. Even with the economy and job market improving, more than one in four student loan borrowers are delinquent or in default on their debt obligations.
Approximately 41 million Americans owe $1.2 trillion in student loan debt. The median debt burden among borrowers was $20,000 in 2014, up from $13,000 in 2007.
Among the biggest loan service providers are Navient, Great Lakes and Discover Banks. These companies manage borrowers’ accounts, process payments and enroll them in alternative repayment plans- including those based on a fixed share of the borrowers’ income.
With no federal standards governing these organizations, the student loan servicers have great leeway in their practices. What’s worse is that borrowers are not allowed to choose their servicers. So if problems occur, the student loan borrower cannot take their business elsewhere.
One of the common borrower complaints among the roughly 1,200 people surveyed was that servicers simply failed to follow instructions. Borrowers hoping to reduce the cost and length of their repayment period often asked servicers to apply payments to their higher-cost loans, first. In numerous incidences, these requests were ignored.
Improper levying of late fees, losing paperwork and making repeated requests for documentation were other practices cited. Perhaps the biggest complaint by borrowers was the failure of student loan servicers to advise them of all their repayment options. In many cases, it meant the borrowers not knowing they were eligible for student loan debt relief.
These relief options include: repayment plans for federal loans based on a borrower’s income and family size or debt forgiveness programs for borrowers who work in public service. Members in the military also have the right to lower interest rates while on active duty.
A recent government report revealed that 51 percent of student loan borrowers nationwide are eligible for income-based repayment plans, but only 15 percent are enrolled. Rather than offer these programs, servicers are quick to recommend forbearance, which stops payments temporarily- but not the interest from piling on. This is an expensive alternative. Some private student loan servicers charge a $150 fee to put an account in forbearance.
This has been compared to the aftermath of the housing crisis, where mortgage servicing companies made it harder for homeowners trying to repay or renegotiate their loans. Borrowers and tax payers deserve better. Repaying student loans is challenging enough without servicers adding to the burden with incompetence and questionable practices.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.
