Large Response to Servicing Issues Survey Guide Loan Servicing Recommendations

By NASFAA Policy and Federal Relations Staff 

In an effort to better inform the discussions of the Servicing Issues Task Force, NASFAA conducted a membership survey on the pervasiveness of problems related to loan servicing in the following areas: application of payments and prepayments, options and processes related to deferment, forbearance, consolidation, and income-driven repayment plans. More than 2,200 financial aid administrators responded from over 1,500 unique institutions.

The high response rate to this survey is a clear indication that this issue is critical to many in the financial aid profession. Findings from the survey include: 

  • More than half of the survey participants who reported handling issues related to repayment plans indicated that borrowers do not understand the advantages and disadvantages to the various repayment plans, across servicers.
  • Nearly half of the survey participants who reported handling issues related to repayment plans indicated payments are not being applied to borrowers’ accounts in a timely and accurate manner, across servicers.
  • More than half of the survey participants who reported handling issues related to prepaying and making payments on individual loans indicated that borrowers are not able to do this easily, across servicers.
  • More than half of the survey participants who reported handling issues related to options for deferment and forbearance indicated that borrowers do not understand the advantages and disadvantages to each, across servicers.
  • More than half of the survey participants who reported handling issues related to loan consolidation indicated that borrowers are not receiving accurate, timely, and easy to understand information, across servicers.
  • More than half of the survey participants who reported handling issues related to income-driven repayment plans indicated that borrowers do not understand the advantages and disadvantages, across servicers.
  • More than half of the survey participants who reported handling issues related to the recertification processes for income-based repayment plans indicated that borrowers do not understand the process, across servicers.

Participants were also given the option to share additional areas of concern related to loan servicing in an open-ended portion of the survey. NASFAA received more than 200 comments in this section. Some notable comments included:

  • Students are unaware of who their servicer is.
  • Borrowers are receiving varying information when contacting the same servicer, hindering their trust in the servicer, and consequentially turn to their financial aid office for help. This is especially true for questions related to repayment options. 
  • The previous consolidation process was fairly straightforward and took approximately two months to complete; today’s process is very confusing for borrowers in repayment. 
  • Loans are going into default because one is missed in the consolidation process.
  • Most servicer representatives do not seem knowledgeable enough to answer detailed questions.
  • Some borrowers are experiencing extended wait times and others are being restricted by customer service time limits once they reach a representative. These actions hinder customer service representatives’ ability to adequately assist borrowers and could result in an unfavorable outcome for the borrowers and/or servicer. 
  • The rehabilitation process is very time consuming for both the student and the financial aid administrator.

The Servicing Issues Task Force is currently using the NASFAA membership survey results, other current and relevant research, and information provided by outside consumer advocates and individuals from the servicing industry to form their policy recommendations that will be presented to the NASFAA Board of Directors for approval and then shared with the membership in early February.

To read more about the work of this NASFAA Task Force and others, please visit http://www.nasfaa.org/volunteer/ and please share your questions and comments in the comment section below or by emailing policy@nasfaa.org.

 

Publication Date: 1/23/2015


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