The Consumer Financial Protection Bureau wants to make you smarter about your student loan repayment options. Basically the message is: We at the CFPB can’t solve all the student loan servicing problems, so you’re going to have to do it yourself. Here’s the best interactive learning tool we have, now please use it wisely.
Thus the Repay Student Debt Tool was created…and released to almost no fanfare. So here’s a little video to explain it. Warning to the legal community: there are some handy dandy DIY lawyer letters included in the Repay Student Debt Tool. Enjoy!
If you run all the scenarios on this decision-tree-formatted program, you WILL be smarter than the average loan servicer. Face it, you clearly have some college education, evidenced by your ownership of some amount of student debt. Plus, you are really motivated to keep yourself out of the mess you’ve been hearing your friends complain about.
The Consumer Financial Protection Bureau (CFPB) has been fielding thousands of these complaints at their Student Loan Ombudsman office.
Here are some of them:
Borrowers were being told either mis-leading or completely wrong information about repayment programs that they were eligible for and which could keep them out of default.
Borrowers attempting to pay down some of their loans early had payments applied to the wrong loan.
Borrowers making partial payments sometimes found the loan servicers were applying the money in such a way as to maximize late fees.
When borrower’s accounts got transferred from one loan servicer to another, as often happens, there was no notification, causing payments to be lost or misapplied.
Even if the borrower’s account remained at the same loan servicer, the borrower could get conflicting answers from different agents. Information that could have been helpful was lost in the shuffle.
There were complaints about lost paperwork, processing errors, and missing billing statements. And on and on…
Meanwhile, the student loan debt problem in the U.S. has gotten so bad that a large percentage of student debt holders were no longer participating in our economy in the form of purchasing homes, autos or major appliances.
To make matters worse, borrowers desperate to get help with their student loan problems started looking outside the realm of unhelpful student loan servicers. And who popped up to fill that need? You guessed it, student debt relief scamsters! (snark follows) “Why yes, just give us an up-front fee and we’ll straighten out all your problems. We’ll sign you up for repayment programs which, oh never mind, are provided completely free to federal student loan borrowers by the Department of Education. And if you act right now, you can get all your federal student loans consolidated into one tidy lower interest private loan! We just won’t mention the fact that you will lose all the rights, protections, privileges and possible forgiveness offered to federal student borrowers.” Scamsters just gotta scam.
So who can we blame for this whole student loan mess and the downright broken student loan repayment system? (Warning: rant ahead!)
Well, the original sin was the creation of the student loan system. This made it easy for completely inexperienced young people to get their hands on staggering amounts of money for college and lifestyle.
As soon as the educational industrial complex got wind of this endless stream of federal cash, the taps were turned to full-on, and rusted in place that way. Thus commenced tuition increases, huge building programs, bulging budgets for staff, researchers, and every kind of amenity for students.
Of course the interest on the loans (to be repayed by the same inexperienced students after graduation) was creating a huge profit for the banks that were issuing the federal loans. The Department of Education (DOE) took notice of this phenomenon and by 2010 took back control of these loans and all the interest.
Right about that time, it became clear that the economy was in a stall and debt-saddled young people weren’t able to buy houses or start families. But, hey, the DOE was doing just fine, thank you. By 2013, the DOE was clearing nearly $40 billion dollars a year in student debt interest.
Along came the most costly of the new repayment programs. The White House ordered up PAYE, the Pay As You Earn repayment plan. This plan would essentially be an interest only gift for low and moderate income recent grads. Original loan amounts would begin disappearing from the DOE coffers and continue through year 20 of repayment. Bad for the DOE’s bottom line.
This very same agency of the U.S. government, the DOE, was also charged with hiring the loan servicers to collect payments from student loan borrowers. The attempt to hire quality servicing companies with well-trained employees has been half-hearted… and that’s being generous. One could be suspicious that all the troubles borrowers have experienced with student loan servicers was an attempt to bring in more revenue in late fees resulting from screw-ups and bad customer service.
But that would be a conspiracy theory…I’ll cast my vote for the stupidity theory instead!