Buzz
The Department of Education is challenging state efforts to implement stricter regulations on student loan servicing companies. Consumer advocates warn that these moves could raise the risk of mismanagement and unethical loan practices.
During Betsy DeVos’s tenure, the Education Department has rolled back several regulations aimed at tightening oversight on federal loan servicing companies. In response, states like Connecticut, California, and Illinois have passed or are attempting to pass their own laws to better regulate these companies, including creating a 'borrower’s bill of rights' with standards for timely payment processing, error correction, and communication, according to The Washington Post. The Department of Education, however, argues that states do not have the authority to regulate these companies.
This is just one example of actions taken by the department over the past year, which consumer advocates believe prioritize the interests of loan companies over students. The Education Department has also ceased working with the Consumer Financial Protection Bureau and blocked its efforts to protect student loan borrowers. In addition, it delayed rules designed to protect students from predatory for-profit schools. Last March, DeVos rescinded a 60-day grace period meant to help students in default avoid a 16 percent fee on their loan balance.
What does all this mean for student borrowers? As Consumer Reports points out, while the legal battle between states and the federal government continues, students will need to be more cautious than ever. 'This shift means student borrowers must take extra care, researching repayment options, verifying that payments are applied correctly, and keeping thorough records,' CR advises. Here’s what they recommend:
Maintain Accurate Records
This may seem simple, but it's crucial to know who your loan servicer is (the company responsible for billing you each month) and whether your loans are federal or private. Track your payments and balances in a spreadsheet, like Excel. If you're uncertain and have federal loans, Consumer Reports suggests checking this national database (here’s how to use it).
Understand Your Repayment Options
Unfortunately, your loan servicer may not be very helpful if you're struggling to make payments and want to explore different repayment plans. Consumer Reports recommends using the Department of Education’s Repayment Estimator or the CFPB’s tool to get an overview of available repayment plans. Private loans typically have fewer options, but it's worth speaking with your servicer about deferring payments if necessary.
File a Formal Complaint
Some of the major loan servicers have an ombudsman you can reach out to for assistance with any issues you encounter:
AES/PHEAA
Educational Credit Management Corporation (ECMC)
Great Lakes Higher Education Guaranty Corporation
National Student Loan Program
Navient
Sallie Mae
Texas Guaranteed Student Loan Corporation (TG)
If that doesn’t resolve your issue, submit a complaint to the CFPB (and review other complaints), or, for federal loans, contact the Department of Education.
