If you’re one of the over 40 million Americans dealing with student loan debt, most likely you’re working with a student loan servicing company as your primary contact to help manage your loans.
What you probably don’t realize is that some of those servicers are actually violating laws about how they’re supposed to be treating borrowers like you.
That’s according to a new report from the Consumer Financial Protection Bureau (CFPB) highlighting 6 common, but not legal, loan practices that these servicer’s are using when dealing with people who have outstanding student loans. If that includes you, we put together a list of the worst of these offenses below so that you know what you need to look out for to protect yourself. Enjoy.
1. Late fees, especially on multiple loans. When you can’t pay your monthly payments in full you usually end up paying substantial late fees and, to minimize those fees, many borrowers instead make partial payments. The problem is that many assume that this minimal payment will cover all of the loans they have with the same servicer, which isn’t exactly true.
In many cases these companies end up taking a partial payment and dividing it evenly across several outstanding loans. This can result in two things; late fees on every loan and, in some worst-case scenarios, every loan going into default.
This practice violates the Dodd Frank Act and is illegal. If your servicing company is doing it, demanding that your partial payments be treated correctly is definitely within your rights.
2. Incorrect minimum payments. On almost all student loans there’s usually a minimum payment due monthly but, when a loan is in deferment, that changes. The problem is that some servicers charge late fees even if you have paid the correct amount based on your particular loans. If that happens you need to first contact your servicer and, if they don’t help you, submit a complaint to the CFPB.
3. Not honoring grace periods. On some student loans there are grace periods where the lender isn’t allowed to charge late fees, even after the due date has passed. Some lenders charge late fees anyway however, which is illegal. If you’ve been promised a grace period, your lender has to honor it and, if they don’t, you should contact the CFPB.
4. Not providing necessary tax data. In many cases consumers with student loans are allowed to deduct the amount they pay in interest on their taxes. In order to do that correctly they need the information from their loan servicer. Some of these companies however are making it more difficult to get that information, which often results in the loss of a tax write off, sometimes as high as $2500. If your loan servicer is making it difficult to get that information, contacting them and letting them know that you will contact the CFPB might persuade them to help you more. If they don’t then, by all means, contact the CFPB yourself.
5. Incorrect information about bankruptcy rights. Many consumers incorrectly believe that student debt cannot be discharged through bankruptcy but, contrary to that information, and to what some servicers will tell you, it’s not always impossible. If your loan servicer has already said that it’s not possible, you might want to check because many are using deceptive practices and they might be misleading you.
6. Servicers who use improper collection tactics. Unfortunately, many student loan servicers also double as collection agencies and, from what the CFPB has seen, use illegal practices to collect on student loans, including illegally calling at impermissible times. Knowing your rights, and asserting them, is necessary in this case.
Those are 6 of the worst practices that some loan servicers are engaged in and, if you find that yours is one of them, letting them know that you are aware, and that you will contact the CFPB if they don’t stop, is definitely within your rights. If they don’t, you should definitely contact the Consumer Financial Protection Bureau and advise them of the situation.