If you’re one of the 40 million Americans with an outstanding student loan, you’ve got a friend at the Consumer Financial Protection Bureau (CFPB). The bureau is stepping up to oversee the seven non-bank loan servicers that deal with student loans every day.
Servicers are the companies you deal with after you get the money. Lenders turn the processing and management of loans over to these companies and now the CFPB says it wants to make sure that loans get processed accurately and fairly.
It’s particularly important because we’re in the middle of a student loan crisis. The CFPB reported earlier this year that outstanding student debt totals approximately $1.2 trillion and about 7 million student loan borrowers are in default.
CFPB Director Richard Cordray said, “Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules.”
The servicers are big faceless bureaucracies and dealing with them is often frustrating, time-consuming and can cost you extra money because of unfair and unnecessary penalties.
A recent annual report by the Bureau’s Student Loan Ombudsman highlighted the following “repayment stumbling blocks.”
- Servicers lose paperwork and make processing errors that result in late fees, especially when loans are transferred from one servicer to another.
- If you have multiple loans and attempt to make a large payment, the payment is often split up and applied to all of the loans instead of the loan with the highest interest, or largest balance.
- If you make a partial payment, it is often spread across your loans so that there are penalties on all of the loans because you haven’t made a full payment to any of them.
The CFPB is an agency that really wants to help and is extremely proactive.
It created an interactive tool, Repay Student Debt, that allows you to explore repayment options.
All of this is great, but if you have trouble with a servicer submit a complaint to the CFPB: http://www.consumerfinance.gov/students/.