Student-loan servicers under fire from public servants

People working in public service and seeking debt relief are launching complaints the companies that service their student loans are giving them the runaround, stalling their progress, and causing costly mistakes.

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Josh Stein, NC Attorney General joined the director of the Consumer Financial Protection Bureau, Richard Cordray, at an event on NC State University's campus in Raleigh on Thursday, following the release of a new report from the Consumer Bureau based on the complaints from borrowers.

The Public Service Loan Forgiveness program, created in 2007, was meant to encourage people to go into public service jobs such as teaching, public health, and law enforcement despite the burden of mounting student loan debt.

Under the program in which Cordray says more than 500,000 people have signaled their intention to participate, borrowers make monthly payments in a 10-year process toward debt relief. According to the Department of Education, nearly two-thirds of them earn less than $50,000 per year.

In October of this year, the first eligible borrowers will begin receiving benefits from the program.

However, Cordray says in complaints filed between March 2016 and Feb. 2017, consumers said student-loan-servicing practices have delayed or denied them access to the debt relief they are pursuing.

Some borrowers have complained they were misled, not receiving accurate or timely information about their eligibility in the program or loans that qualify.

"I went through my first year and found out that half of my loans were the wrong kind of loan and so that whole year's worth of payments I made are not eligible for that program," said Amy Ryder-Burge, who received her master's degree from NCSU.

As a result of the complaints, Cordray said CFPB is updating its exam procedures so examiners scrutinize servicers' compliance with the law when they administer the program.

"Most people go out and get a job and pay their loans back directly just the way they're supposed to," said Stein. "But if you are a teacher or if you are a firefighter, there are programs available to you that can help you repay that loan in an easier fashion. It is the duty of the servicer to make sure that the borrowers know about those programs and give them the option to participate."

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The CFPB is also launching a campaign called Certify Your Service, to better inform borrowers about what they need to do to make progress toward loan forgiveness:

1) Check the type of loan you have.

Cordray said borrowers need to make sure they have the right type of loan; only Federal Direct loans qualify under the Public Service Loan Forgiveness program.

Those with other types of federal loans may be able to roll them into a Direct Consolidation Loan to become eligible.

2) Check your payment plan.

Some repayment plans, such as extended repayment plans, do not count toward public service loan forgiveness.

3) Certify you work in public service.

Borrowers should be sure to certify they work in public service to help track their progress through an employer certification form.

4) Keep a copy of your records.

Cordray urged borrowers to keep a copy of their records and follow up with the loan servicer to update the form each year.