There are multiple types of mistakes you could make while repaying your federal student loans. You could make late payments or pay the wrong amount. Another common mistake is not utilizing income-based repayment programs while experiencing financial hardship. However, you should also be aware that there are mistakes you could make while talking with your loan servicer. These are companies contracted by the Department of Education to collect payments on loans and answer inquiries.
There are general mistakes and major mistakes you could make with your student loan servicer. Forgetting to update your address information may not be a big deal if your servicer has a copy of your email or phone number. More serious mistakes could cost you hundreds or even thousands of dollars.
Mistake #1: Not Keeping Records
Student loan servicers are notorious for making mistakes. Borrowers have reported their servicers lost paperwork, applied the incorrect amount for payments and made errors on applications for income-driven plans. Some servicers have even reported balances that did not exist.
Keeping records is an essential part of doing business with student loan servicers. You should keep copies, both physical and digital, of any correspondence between you and your servicer. Should an issue arise, you could point where the servicer made an error. If you do not keep records, it will take much longer to resolve any issues that may arise.
Some conversations with servicers take place over the phone. Make a note of who you talked to, what time the call took place and what was discussed.
Mistake #2: Failing to Recertify Your Income-Driven Plan
You are required to recertify your income-driven plan each year. This means you will need to send your servicer information about your income by a specific deadline. Your servicer should send you an email or letter telling you when you need to recertify. You should call your servicer immediately if you are not sure about the recertification deadline.
If you fail to recertify, then your payments will revert back to what they were under a 10-year-repayment program. For some borrowers, payments could increase by several hundred dollars with no warning. This means that if you are enrolled in autopay, your checking account could be auto-debited for a payment that far exceeds what you were expecting. You could incur even more fees if you overdraft a checking account linked to your student loan payments.
Mistake #3: Not Doing the Research Yourself on Payment Plans
Student loan servicers have given borrowers incorrect information on payments plans. For instance, there are reports of servicers telling borrowers with FFEL Loans they are eligible for Public Service Loan Forgiveness (PSLF). There is just one problem: FFEL Loans are not eligible for this program. Only Direct Loans are eligible for PSLF.
Servicers could make similar errors while discussing income-driven payment plans. For instance, it is not widely known that REPAYE takes the joint income of married filers into account when calculating monthly payments. This is true even when tax returns are filed separately.
Research an income-driven repayment plan very carefully before enrolling. Ask yourself several questions during the research process. How will my payments be calculated and how much will I owe each month? How many payments will I have to make until I receive loan forgiveness? How will an income-driven plan affect my balance and interest? When will I have to recertify my income?
Mistake #4: Not Knowing How to File Complaints
You may have several options if your student loan servicer is not performing his or her job duties. The first option is to log a formal complaint with the Consumer Financial Protection Bureau (also called the CFPB). This organization was created by the Dodd-Frank reforms after the 2008 financial crisis. You should be prepared to send the CFPB any paperwork that corroborates your claim against the servicer. Just be sure to make copies first.
After your complaint is submitted, it may be reviewed by the CFPB. The CFPB will then reach out to the servicer with your complaint and wait for a response. Basic information about your complaint will be published on the CFPB’s Consumer Complaint Database. Additional information could also be published, but only with your permission. The CFPB will let you know when the servicer responds.
You could also contact the student loan ombudsman, a neutral third-party who could work to resolve problems between you and your servicer. However, the ombudsman should only be used as a last resort.
Questions About Student Loans? Contact Our Kansas City Student Loan Lawyers
Our Kansas City student loan lawyers could help borrowers who are struggling with repayment. If you want to explore debt relief options for student loans or options for repayment, then we encourage you to reach out to our firm. For future newsletter updates, continue to follow The Sader Law Firm on Facebook and Twitter.