Can you trust your student loan servicer?
Hopefully your student loan servicer isn’t one of those in the news lately. Reports of companies misleading consumers seem to be on the rise. It is abundantly clear, how one repays their student loans has never been more complex because of so many variables in the decision process.
Federal student loan repayments have been paused again. While this provides temporary relief, consumers need to be proactive and take smart steps to prepare for the future. Now is an excellent time to review the details of your loans and seek qualified advice. When payments are to resume, student loan servicers will be swamped with calls even more than now.
We strongly suggest taking a detailed inventory of each of your loans (amount due, interest rate, federal, private, etc.) and start a conversation with a professional advisor on your best path forward.
Why getting a 2nd opinion is important
And now, it’s even more challenging because there is an increasing volume of poor “professional” advice and outright fraud by players claiming to help borrowers while extracting money for nothing.
If you visit your servicer’s website, there’s a good chance there will be messages that you shouldn’t have to pay for advice on student loan debt repayment. Yet, what is the quality of the information relative to your situation?
Repeatedly we’ve found through numerous independent advisors how multiple calls to student loan servicers on behalf of their clients yield different and conflicting answers to borrower questions! And what’s worse, some responses were incorrect and others created more borrower confusion.
We’ve stated on numerous occasions that student loan servicers aren’t technically in the business of providing personal financial advice. Unfortunately, many borrowers still aren’t fully aware of this. The scope of the servicer’s job isn’t to provide personal financial advice. For example, they can only explain about the function of student loan consolidation but, cannot necessarily advise on the full implications of such a decision down the road.
Getting a 2nd opinion on a consolidation decision should be made in conjunction with an advisor who understands the rules and can advise on any future impacts of this choice.
Consumer Financial Protection Bureau (CFPB) sanctions a student loan servicer
This past week, the CFPB sanctioned Edfinancial Services, a student loan servicer, for making deceptive statements to student loan borrowers and misrepresenting forgiveness and repayment options. Essentially, Edfinancial Services deceived borrowers with FFELP loans about their Public Service Loan Forgiveness eligibility. Edfinancial Services was fined $1 million and ordered to contact affected borrowers with accurate information.
If you are a borrower and have issues with a student loan servicer, you can submit a complaint to the CFPB here.
Why you need a competent advisor
If you’re relying 100% on information from your loan servicer to make decisions, you may be taking a risk.
You must take responsibility to log into your accounts regularly and be familiar with the data. All of your federal loan data is available on student aid.gov. If you have private loans, your lender probably offers a portal for access.
You can provide this information to your advisor who can analyze your best choices. A qualified advisor will gather information about our financial status and future goals to create an analysis of options available to you. It will help you to make decisions about potential changes to payment planning.
A competent and well qualified advisor should be able to show you a contrast between different repayment options that can meet your needs such as lower payments, faster payoff, reduced interest accrual, etc
The challenging job of student loan servicers
The servicers are in a difficult position. Over the years, the government has created multiple repayment programs and continues to tweak them. These changes make the work that loan servicer employees do even more difficult. And most do a great job.
Unfortunately, as in any organization there can be a few bad actors. We want to emphasize that servicers have limitations on what they know and can do for you.
As you might do regarding a serious health issue, 2nd opinions are a smart decision. If you are seeking a review of your loan and analysis of available options, read our post on choosing a financial professional here.
Summary
If you are a borrower, understand the limitations and shortcomings of your student loan servicer. Sure, talk to them but get a second opinion. The best advice we can provide is to find a reputable, well-qualified financial professional who continues to advance their knowledge about student loan repayment plans and their effect on your economic conditions.
Student loans are arguably the largest or 2nd largest expense one might have in their lives. For this reason, it is wise to focus on getting the best advice and vetting the source.
Certified Student Loan Professionals may be able to help you understand your options and assist with servicer issues. Contact one here and ask about their specific services.
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About the CSLA Institute
Educational services to professional financial advisors student loan borrowers.
The CSLP program for financial professionals enables their delivery of advisory services to clients with student loans. Student loan borrowers can locate qualified advisors to assist with their student debt questions and planning.
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