There has been a lot of uncertainty regarding the Public Service Student Loan Forgiveness (PSLF) program recently. That being said, we think it is likely to remain in place, although perhaps in a modified form. Accordingly, it is important for borrowers entering public service employment to be prepared.
Knowing what to do is especially important when student borrowers run into problems with their loan servicing company. As with any problem, the more you know, the sooner you can take action and the better off you’ll be in the long run.
What Your Loan Servicer is Not Likely to Tell You
Since student loan servicing companies encourage borrowers to contact them for help when questions arise, students generally think that these companies are here to help them. However, it is important to realize that there are some very important things that a student loan servicing company might not share with a borrower.
One of the most important things that a student loan servicing company might not tell borrowers is that they’re even eligible for an income-driven repayment plan.
The company also isn’t likely to remind participants of federal loan program requirements, such as annual employment or repayment certification.
Finally, companies might not alert borrowers to ways in which lifestyle or financial decisions can affect repayment. For example, getting married and choosing to file federal income taxes jointly can significantly alter repayment obligations.
Problems Student Borrowers are Encountering
According to the Consumer Financial Protection Bureau (CFPB), most of the increase in the number of complaints they’ve received in the first three months of 2017 are related to student loan servicing companies.
Students’ primary complaints involve mishandling of their accounts. These complaints include incorrect charges, delays in resolving incorrect charges, and outright misinformation provided to them by the student loan servicing company. These errors cost students not only time but money in fees and interest. The longer these problems go on, the greater the chance that students risk default.
The CFPB also reports that more than three-quarters of at-risk borrowers coming out of default are not signed up for any kind of income-driven repayment agreement. Based on the agency’s analysis of borrower-related data provided by student loan servicing companies, students in this situation are at a high risk of a repeated default.
What You Can Do to Fix the Problem
Fortunately, you have recourse to fix the problems you may experience with the PSLF program. It isn’t a requirement of the program that borrowers have to sign up right out of college. But borrowers still really have to do their homework when enrolling.
Eligible borrowers working in public service fields can apply for enrollment. Upon ten years of qualified service (employment) and loan repayments, the remaining debt may be forgiven. The first wave of borrowers enrolled in the program may begin applying for forgiveness in October 2017. These borrowers will be working closely with their student loan servicing companies soon.
While the CFPB has said it will do a more thorough job of making sure student loan servicing companies are maintaining accurate records and providing students with timely and accurate information (even going so far as to sue one of the nation’s largest servicing companies for unfair practices and consumer deception), there are steps student borrowers can take as well.
Make Use of the Employer Certification Form
It’s critical to use the voluntary Employer Certification Form annually or when changing jobs. This keeps records related to PSLF enrollment up to date with the student loan servicing company. Filing the form can also alert students right away when there’s a problem. For example, they may be working for an employer that the loan servicing company does not consider qualified.
Participation in the PSLF program requires students to sign up for an income-driven repayment plan. Upon successful completion of the program, anything remaining after ten years is supposed to be forgiven. Again, regular completion of the Employer Certification Form can help verify that the student loan servicing company’s records are accurate. When accurate records are kept, students can get credit for the payments they’re making.
Whom to Call for Help
Even with staying on top of paperwork and record-keeping though, borrowers can still have an issue with the loan servicing company. Borrowers who cannot resolve complaints with their student loan servicing company directly can find help. For starters, they can file a complaint with the CFPB directly. They can also reach out to entities like the U.S. Department of Education, a local ombudsman or citizen’s complaint office or agency.
Lame Excuses coming from the Loan Servicers
One last tip: be aware that student loan servicing companies may not see helping borrowers as their job.
In a recent court filing, the student loan servicing company Navient said its only obligation is to the banks and lenders to whom student loan repayments are owed. This was in response to a lawsuit filed by the CFPB. Lawyers for Navient further made the case that the company had no legal obligation to student borrowers, which I find hard to fathom when the company’s website states it wants to help them.
Students with large government loans can feel pretty anxious about paying them back. It’s natural to assume that a student loan servicing company will be there to help. However, it’s not a guarantee that a borrower won’t face any repayment problems or issues with the PSLF process.
In order to be prepared, student borrowers need to be aware of their obligations under the PSLF program. They need to work with their student loan servicing company when possible. Most important, however, they need to know that they can turn to agencies like the CFPB for assistance in filing a complaint when necessary.