This is how Student loan servicers abuse IDR IBR applications. To make your student loans manageable:
Your student loan is almost always managed by a servicer. The system acts similarly to how mortgages are serviced. A servicer is a private company that makes calls, sends letters and processes the rehabilitation and consolidation applications. Servicers are primarily interested in their own profits. They are not interested in you regardless of what they say. They earn a percentage from your collected payments and late fees. If the loan becomes inflated they charge higher fees to DOE and taxpayers. The higher your balance and payments the higher their profits. In order to make higher profits they often steer students into higher interest rate loans or programs which make the most profits for the servicer. In 2017 Navient was again sued for these fraudulent practices.
How to file a CFPB complaint and make your student loan affordable
The government makes a handsome profit from your loans even with all the loans that are in default. If you are having a hard time getting a consolidation or rehabilitation because servicers won’t make it affordable complain to the CFPB or you may want to file a bankruptcy and ask for a hardship discharge if they refuse to make it affordable. There is a link for filing a complaint on the CFPB website. It is amazing the new terms a servicer often offers to avoid having their harsh or unreasonable demands discussed in front of a bankruptcy judge or after an auditor is sent to their offices.
If you are having a hardship and have a zero income this year then do not use a forbearance or deferment. Instead your income based repayment of a year with zero income is 0. You still get credit for another year towards the 20-year IBR or IDR repayment when your income is 0 and your payment is zero.
Your servicer should be listed on your monthly bill. If you have federal student loans login to My Federal Student Aid to find your servicer. If you have private student loans check your credit report. With federal loans, you normally want to be in an income based repayment plan. With private loans, you may want to simply move to a state with a short statute of limitations or very good consumer protection laws that prevent collections. Private student loans are just credit card debts which can’t normally be discharged in bankruptcy unless you obtain the undue hardship discharge in an adversary proceeding. Private student loans must sue and obtain a judgment to garnish wages and a bank account. Government student loans don’t.
- Pay the loans that they make the most profit from. They will normally pay off the lowest interest rated loans first to maximize their profits.
- The best government loans are IBR and IDR loans. IDR loans are only 10 percent of your discretionary income. These student loans are available at StudentLoans.gov . However Servicers will often overcharge to increase their incomes.
- Very few options are available to private student loan borrowers which make private student loans easier to discharge. Still you have an obligation to exhaust everything you can do before you ask the bankruptcy court to discharge a student loans so you must at least apply for an IBR or IDR and ask a servicer what options are available before asking for any help from the bankruptcy court and some agencies.
- Veterans and service members have additional rights and protections including service connected discharges.
- Many of the for-profit schools have private loans which involve co-signers. Many of these loans and schools never had any reasonable expectation of your repayment of the debt. Instead the schools and lenders had higher interest rates and always expected to sue the cosigner and sell the home of the cosigner or garnish the wages of the cosigner to pay the debt. Any planning must include considering what protections you need for the cosigner as well. The cosigner accepted the responsibility for the loan when the loan was made.
Complain to the CFPB
Complaints about a servicer is made to the CFPB website or you can call (855) 411-2372. Almost all student loan debt relief programs are frauds. Before you hire an “attorney” or law firm to deal with your student loan problem check with the bar association to confirm that the law firm is licensed. The individual that just got out of prison last week does not have a problem claiming he is a debt relief law firm or attorney. These criminals will take your money.
Real attorneys are licensed with their state bar associations like the Kentucky Bar Association in the state capitols like Frankfort Kentucky. They often belong to national associations like NACBA the National Association of Consumer Bankruptcy Attorneys. Attorneys are required to attend class every year to keep up their licenses. If they know what they are doing, they teach how to bankrupt student loans or how to deal with foreclosures as I have done with NBI. They may have written books to train other attorneys, teach together with top attorneys or at least taken from the top national experts such as:
- Morgan King for tax cases and student loan issues.
- Josh Cohen the “student loan lawyer”.
- Pete Barry who sues debt collectors in Wisconsin for FDCPA.
- Max Gardner for foreclosures.
For the expanded checklist on how to handle your student loan see our main page on how to manage your student loan