Federal Student Loan Changes Spark Unprecedented Number of Borrower Complaints | Global News Avenue

Seismic changes to the federal student loan system in 2024 have prompted a flood of complaints from borrowers, many of them targeting the companies that administer the loans.

That’s according to two government reports this week, which showed a record number of borrower complaints, mostly against companies that provide customer service and collections on behalf of the Department of Education.

The Department of Education received 289,523 complaints in the fiscal year that ended in September, more than double the 122,632 complaints the year before, the Department of Education’s federal student aid (FSA) ombudsman said in a report this week. . The Consumer Financial Protection Bureau (CFPB) received a record 13,524 complaints about student loans during the same period, its ombudsman said in a separate report.

The report highlights how student loan servicer Over the last year, we have worked hard to implement numerous changes to the student loan system. These include Restore required payments Federal Court launches SAVE repayment plan after pandemic forbearance ends subsequently blockedas well as many other rule changes. The report also shows that problems have persisted since the government took office. Punished Student Loan Servicers For errors that affected borrowers in previous years.

“Student borrowers continue to face lengthy delays and costly errors due to servicer failures,” CFPB Director Rohit Chopra said in a release.

So what are all the student loan complaints about?

The bureau said borrowers’ accounts were incorrectly adjusted, told to pay money they didn’t owe, funds were unexpectedly withdrawn from bank accounts and important paperwork was delayed.

These mistakes often have serious consequences for borrowers. Borrowers told the bureau they fell behind on rent or car payments, lost eligibility for mortgages and were even pushed to the brink of homelessness.

For example, a borrower receives a letter from MOHELA stating that their loan has been public service loan forgiveness program. The company later told the borrowers that the letter was sent in error and that they still owed the full balance of $26,000. The bureau said borrowers must change jobs to accommodate the financial burden.

Another borrower told FSA ombudsmen that they had made the 10 years of payments required by PSLF to have their loan forgiven, but MOHELA was still sending them bills six months after he submitted a form to have his loan forgiven.

“Why am I still getting bills? When can I get a forgiveness letter? I’m 71, retired and I need to quit my job and move on with my life,” the borrower said. UK Financial Services Authority Report.

In another example, a borrower said Maximus Federal Services withdrew $6,897 from their bank account and they only owed $1,048. The company admitted the error and provided a refund a month later, the bureau said.

What do student loan servicers and advocates have to say?

The department cited MOHELA, a Missouri-licensed quasi-governmental company, as the primary source of complaints. MOHELA services 18% of student loans Income driven repayment planbut the FSA ombudsman said 52% of borrower complaints involving income-driven repayment plans related to the company.

The Student Borrower Defense Center, an advocacy group, issued a press release calling Mohla’s mistake “shocking.”

“This was not just mismanagement, it was mismanagement. It was a betrayal of the public trust,” SBPC Executive Director Mike Pierce said in the release.

A MOHELA spokesperson said the complaints were due to unprecedented rule changes, including changes to resumption of repayments and PSLF.

“These incidents themselves may trigger an investigation. We reject any characterization of inappropriate behavior by MOHELA,” the spokesperson said in an email. “MOHELA is always working with the department to refine processes and improve services for all borrowers.”