Student Loan Borrowers Dazed and Confused by Servicer Shuffle

[marmar]

Student Loan Borrowers Dazed and Confused by Servicer Shuffle

by Marian Wang
ProPublica, April 23, 2012, 2 p.m.


The Department of Education has been transferring large batches of federal student loans to new loan-servicing companies — leaving in the lurch some borrowers who are suddenly encountering problems with their loans, such as payments that are mysteriously adjusted up or down.

The switch, which has been going on for months and will ultimately include millions of loans, is mandated by a little-known provision tucked into the 2010 healthcare overhaul. Pushed by a consortium of nonprofit student loan companies, the provision forces the DOE to use nonprofit loan servicers. But at least in the short run, the switch has caused problems.

Borrower Isabelle Baeck said that after a new servicer, Mohela, took over her loans in December, she received a letter saying that her monthly payments had been reduced to $50 — roughly a quarter of what they had been. The change meant Baeck would ultimately pay more in interest over a longer period of time. Concerned, she said she has made repeated calls to get the problem fixed, only to have the payments repeatedly readjusted.

A Mohela representative declined to comment on specific borrower situations but said that the company is working hard to minimize disruption and to resolve issues as they arise. ...................(more)

The complete piece is at: http://www.propublica.org/article/student-loan-borrowers-dazed-and-confused-by-servicer-shuffle

[Mnemosyne]

1. Criminal. nt

[xchrom]

2. Corporations - w/ government aid -

Making obscene profits on 'Rents'.

[justgamma]

3. I guess I don't get it.

She's mad because they lowered her payments? Is there anything that says they can't pay off the loan early to save on the interest? I'm sure lower payments would be welcomed by many as they start their working life. They can pay it off sooner once they get established.

[Gold Metal Flake]

4. They changed the terms of the loan payments without her knowledge or consent, it seams.

The borrower did not like the new terms, and tried to change it back. Subsequently there have been other unauthorized changes and she does not seem able to get things stabilized.

I can not speak to her situation, budget, or preferences. I can just say that if I were in her situation with my car loan, credit card account or mortgage I'd be pretty fucking pissed right about now.

I'll be in the market for student loans soon and this is important info for me. By the time I start applying I will have put together a plan for dealing with bullshit like this. Thanks, OP.

[Ruby the Liberal]

5. I had the same initial reaction.

They can set all of the minimum payments they want, but they can't refuse her money.

If she wants to continue to send in $200 a month, it matters not what they want her to send.

Now if the issue is extending the timeline on the debt and changing the interest rate, she has a gripe, but griping about the minimum payment due is either her not understanding the math or lazy reporting. I'm thinking the latter under the "lowest common denominator will understand this" mentality...

[Gold Metal Flake]

6. Sounds like, as I read the latter paragraphs, that the service companies are not supplying balances.

That is some serious shit. There seems to be no accounting and the company itself is confused as to the account status. The OP has already quoted 4 paragraphs or I would quote directly.

[Ruby the Liberal]

8. DMCA says you can quote up to 4 paragraphs as long as you make comments

specific in relation to what you are quoting.

And you are right - that is some serious shit. I didn't think it was legal under the 1990s credit card "reform" bill (the one thing I could smack Joe Biden over) for them to not provide all of the relevant (and annualized) information about the account.

[Enrique]

7. i hope that doesnt happen to me

since my loan servicing was turned over to the DOE by Obama earlier, it was better in every way. I would fully expect it to get worse if it was transferred to whoever.

By the way, someone explain to me what this is doing in the health reform legislation.

[Ruby the Liberal]

9. I honestly don't think there is a soul on this planet

that knows what all is buried in that bill.

[murielm99]

10. Mine suddenly turned into a Sallie Mae loan.

They kept charging me huge late fees, even though my payments were on time. They changed my due date.

I did not owe that much any more, so I got a loan at my local credit union and paid off Sallie Mae. I am much happier paying the credit union. I know my balance, and when it will be paid in full.