A new report from the Consumer Financial Protection Bureau (CFPB) finds that inaccuracies in reporting enrollment status or outdated information can result in student loan borrowers paying additional interest charges, unexpected loan bills, and experiencing lost eligibility for other student loan benefits.
The report, released Monday, is an analysis of student loan borrower complaints made to CFPB detailing loan servicing problems they have experienced due to inaccurate or incomplete reporting of their dates of enrollment, current enrollment status, and/or their anticipated graduation date.
According to CFPB, enrollment status is a determining factor for when a student must begin to repay their federal or private student loans, when any unpaid interest is added to their loan balance, and how interest subsidies and other borrower benefits are applied to the borrower’s account by a student loan servicer. This information is provided by the borrower’s institution, as required by the Department of Education (ED) under the Higher Education Act, and the information must be provided accurately, in a timely manner, and completely to ensure that a loan servicer correctly places a loan in repayment and calculates the balances and accrued interest correctly.
However, CFPB complaints unveil a host of servicing problems caused by inaccurate enrollment status reporting, which can result in costly and frustrating challenges for student borrowers. For example, CFPB received complaints borrowers were prematurely entered into repayment, despite being enrolled in college at the time. Some borrowers reported that they experienced this particular issue “multiple times,” CFPB reports. Other borrowers even said that their loans were treated as past due and reported to credit reporting agencies as delinquent, despite their enrollment status being more than half-time.
Another complaint highlighted in CFPB’s report is that inaccurate information about a borrower’s enrollment status can lead to unexpected bills or surprise delinquencies upon their leaving school because their separation dates were reported inaccurately.
For students who returned to school following a period of separation, borrowers reported that errors about changes to their enrollment status led to short-term financial distress. CFPB complaints claim that “it took months” for servicers’ systems to accurately reflect that students were once again at “in-school” status, “requiring [borrowers] to continue making payments during this period, even where tools exist to prevent this hardship,” according to the report. Some borrowers said this error resulted in their having to pay late fees and being reported delinquent on their loans.
Inaccurate enrollment information can also have a long-term impact on student loan borrowers who are returning to school, as some reported to CFPB that they were being billed throughout the course of their program of study, even after they had attempted to get an in-school deferment from their servicer.
But perhaps most troubling is the CFPB finding that borrowers encounter roadblocks when trying to correct issues related to their enrollment status, due to “the absence of an effective process they can follow.” For example, some borrowers described unsuccessful encounters with personnel, including staff at their institutions, customer services representatives at their institution’s third-party enrollment reporting company, and customer service staff from their loan servicers. Other borrowers said that while they were able to correct the errors in their enrollment status, “they often are placed back in the wrong status repeatedly,” according to CFPB.
“If these errors are not corrected, this can hurt the borrower’s credit and cost hundreds, and, perhaps, thousands of dollars over the life of the loan,” according to CFPB. “Stakeholders that compile and use enrollment information should be aware of the important role that timely and accurate information plays in the management of student loans.”
In an effort to educate student loan borrowers, CFPB also issued a consumer advisory warning about the issue.
Publication Date: 2/28/2017