By Allie Bidwell, Communications Staff
Student loan borrowers hoping to lower their monthly payments by enrolling in income-driven repayment plans are often plagued with servicing problems that complicate the process, such as processing delays and wrongful rejections, the Consumer Financial Protection Bureau (CFPB) said on Thursday.
A new report from the CFPB’s Student Loan Ombudsman details borrower complaints related to income-driven repayment enrollment, and calls on servicers to improve their practices. The CFPB also released a “Fix It Form” servicers could use as a tool to help borrowers correct or update incomplete applications.
“Student loan servicers continue to fall short when it comes to helping borrowers address $1.3 trillion in student debt,” said CFPB Director Richard Cordray, in a statement. “It’s time servicers focus more effectively on processing applications for income-driven repayment plans properly.”
The Obama administration has continually pushed for increased enrollment in income-driven repayment plans. Of the more than 40 million student loan borrowers, about 5 million were enrolled in an income-driven repayment plan as of the first quarter of 2016, but several reports have indicated that the plans are underutilized.
The CFPB’s report analyzes about 2,400 complaints related to federal student loan servicing. The report notes that borrowers complained of delays in their applications, which it says should take no more than two weeks to process. However, some borrowers reported waiting weeks or months, which “can cause borrowers to lose out on protections that can lower their monthly payment, save them money on interest charges, and start them on the path to loan forgiveness.”
Other borrowers complained of their applications being rejected due to missing information, lost paperwork, or human error – without being given the opportunity to re-submit or correct the application. Those borrowers who have been successful in enrolling in an income-driven repayment plan also complained of encountering the same problems when they submit a recertification form.
“Student loan servicing breakdowns can stack thousands of dollars of hidden costs on the backs of borrowers who can least afford them,” said CFPB Student Loan Ombudsman Seth Frotman, in a statement. “Too many student loan borrowers are struggling to take advantage of their right to pay based on how much money they make. Servicers who want to better serve their customers can take the immediate steps recommended in this report to clean up this broken process.”
Publication Date: 8/19/2016
You must be logged in to comment on this page.