By Jennifer Wang
Have you ever thought to yourself, “it should be way simpler to pay back my student loan debt?” Or, “Why is it so hard to get through to someone at a servicing company?”
Student loan servicing companies are supposed to help you — the borrower — manage your loans while in repayment. The Department of Education assigns federal loans to companies, such as Navient (previously Sallie Mae) or Nelnet, who in turn are tasked with managing a student loan and collect monthly payments.
Many borrowers interact with servicers for years, even decades, but not all consumers have good experiences that they consider friendly — and this needs to change.
We recently conducted an online survey to learn about the experiences of borrowers in repayment, and received 1,230 responses to questions about borrower-servicer relationships. Our respondents were part of a self-selecting sample, but their collective experiences are troubling. Many borrowers expressed a high level of concern, if not distress.
Thirty-eight percent of respondents said that they do not receive timely and accurate responses from their servicers. In fact, fifty-four percent of the folks we spoke to said they believe their servicer has made it MORE difficult to repay their student loans! A borrower wrote, “My servicer did not accurately display federal repayment plans that I was eligible for.”
Thirty-nine percent of borrowers surveyed said they contacted a student loan servicer but were not able to reach a positive outcome. One borrower told us, “I contacted Sallie Mae about putting my account on forbearance due unemployment. Little did I know, I was never put on forbearance, and eventually my account defaulted.”
And the majority of respondents told us they were given a new servicer after taking out a loan. Of eighty-two percent of respondents who said their servicer changed, thirty-two percent experienced problems repaying their student loans as a result. One borrower told us, “When my loan servicer changed, my loan balance appeared as zero for months. I attempted several times to get an answer to no avail. I then got a nasty letter in the mail demanding back payments which had never previously been billed to me.”
Fifteen percent of folks we heard from sent instructions to their servicer with a payment (like asking their servicer to apply their payment to highest interest loan) and those instructions were not followed. A borrower who tried this said, “On multiple occasions I’ve sent letters plainly detailing how I would like extra payments applied. These letters were ignored and Sallie Mae applied the payments as they saw fit.”
We believe we have multiple reasons to be concerned about borrowers in repayment. Congress, the Department of Education, other agencies, and servicers themselves must act to address borrowers’ concerns. There are forty million student loan borrowers in our country and with $1.2 trillion piled high in student loan debt, our nation can’t afford to let borrowers face steeper financial challenges.