As synonymous is college education to student loans, student loan repayment seems to have the same effect with student loan servicers. It is almost impossible to think of one without the other. Most people would now associate higher education with the need to take out a student loan. This is because not all American families are able to put up and build a college fund that can cover the whole ride.
Then when repayment is due after separating from school, it is hard not to think of student loan servicers as well. This is especially true for the almost 40 million consumers who are at least trying to balance one outstanding student loan according to Mainstreet.com. And with this number, the federal government is unable to carry the communication with the borrowers thus the need to outsource it to loan servicers.
With the $1.3 trillion student loan debt in the country, majority of this are federal student loans and a small amount are private student loans. It is no secret that federal student loans has more benefits and advantages over private student loans but when it comes to repayment, the loan servicers are taking some heat in how they deal with student loan borrowers.
Federal student loans have lower interest rates than private student loans and also has more repayment plans to choose from when the bill comes due. Federal student loans are also need based while approval and the interest rate to be used are all based on the capacity of the borrower to repay which is quantified by their respective credit scores. The higher the score, the bigger the probability of approval and getting low interest rates.
But the student loan servicers are getting a lot of attention right now in a not so good way. As the federal government loans money to students through the US Department of Education or ED, the actual servicing of these loans are outsourced to student loan servicers. These includes collection of payments and making sure that the borrower is able to understand his or her options in meeting their financial obligations on their college loans.
Student loan servicers’ collection practices are questionable
According to a report by NCLC.org, they are claiming that the government’s decision to use collection agencies are short sighted. This of course refer already to the existing loan servicers and those agencies that are tasked to collect on loans that already defaulted. This shows how the borrowers are still struggling with their student loan repayment.
According to USNews.com, there are over seven million borrowers in 2013 that defaulted on either their federal loans or private student loans. This means that they were not able to make a payment on their student loans for nine months or 270 days. This means that they could either have overlooked the account or are experiencing some financial hardships.
As these borrowers struggle, they would need to coordinate with their student loan servicers for options on how to best solve their problem. But as great as this maybe, some student loan servicers’ collection practices leaves much to be desired. This recently came to light are now the topic on student loans.
- Inappropriate collection calls. There were some student loan servicers who made calls to borrowers either too early in the day or too late in the evening. These are forms of harassment and should not be tolerated. There was even one borrower who received 48 phone calls during the time of the survey. The collection calls should be done within decent hours in the day and not when the borrower is about to sleep or just getting out of bed. Granted that borrowers need to pay their student loans but these borrowers needs to be protected from harassment on collection.
- Late fees on underpayment. As student loan borrowers rely on loans during school, they usually end up with a lot of student loan accounts that they have to repay. Oftentimes, borrowers have more than one student loan account with their loan servicers. With this, they just sum up all the minimum payments on the accounts and send one lump sum payment to their loan servicers. But once they send below minimum payment on one account, the student loan servicers applies the payment equally across the board. This can lead to underpayment on a lot of accounts and the borrower will be charged fees. Some loan servicers do this to be able to collect fees on the account
- Minimum payment is more than necessary. There are some student loan servicers who seems to increase the minimum payment amount by adding the interest that are accruing on accounts that are on deferment. Although it can be paid and can help the borrower lower the amount to be paid in the future, it needs to be done with the knowledge and approval of the borrower.
- Late fees in grace period. Just like in most payments, the borrower is given a grace period to be able to send in their payments after the due date. If the due date is the first of the month and there is a 15-day grace period after that, it means that the borrower has until the 16th of the month to send in the payments. This is the same with student loans where the loan servicers usually give borrowers a grace period to send in their monthly payments. But there are some student loan servicers who are still assessing late fees for payments received inside the grace period.
The government stands to earn from student loans
The Huffingtonpost.com shared that the federal government took in about $50 billion in student loans in 2013. This is with the help of student loan servicers who are collecting in behalf of the government. These companies has a big collection arsenal on their hands being able to utilize wage garnishment, intercepting tax refunds and even taking the benefits of the retired borrowers who still has payments on their student loans.
This begs the question if the loans are really meant to help the students or is a great source of revenue for the government. If it is the latter, then why are other foreign governments such as that of Germany able to waive off and offer higher education for free to students. They are investing on the future economic movers and shakers to be able to propel their economy forward.
Making the payments as easy as possible
As you tackle repayment hopefully with the help of your student loan servicers, here are some things to look into to help make the process as easy as possible.
- Loan consolidation. If you are looking at multiple student loan accounts, consider student loan consolidation. You can look at student loan consolidate review websites to check the company that can help you achieve your repayment goals.
- Understand your options. Your student loan servicer can help you look at your repayment options but it is better to have knowledge about it beforehand. This way, you are just asking about the benefits and advantages of the plan and not how it works. You will also be able to make informed decisions as you go along.
- Make extra payments This is not mandatory but if the budget allows for a few extra dollars to be paid to student loans, it will help you save up on interest payment and pull the pay off date closer.
- Monitor your payment posting. You do not need to monitor your accounts every single day. Doing it once a month is enough just to be sure that you payment are posting on your account and they are being applied accordingly.
Student loan servicers acts as the extension of the ED and helps collect the payment on the loans. But in some cases, some of them uses questionable collection tactics that are not beneficial for the borrowers.