Business Are in Business to Make Money
The main objective for most businesses is to make a profit. Some businesses will attempt to meet this objective at any cost even when it seems counter to what the public believes is their mandate. This is why we have been telling people not to trust the advice given to them by their student loan servicers for some time now.
Student loan servicers have numerous conflicts of interest in how they are paid for servicing your loan repayments. Their best interests are not necessarily in your best interest.
You Are Responsible if They Make a Mistake
If you make a mistake on your student loan repayment, choose the wrong repayment plan or choose to go into forbearance when you don’t need to, it’s your problem, not the servicer’s. Much like advice from the IRS, if the advice given is incorrect or inaccurate, you, not the servicer are responsible for the mistake.
Navient is Getting Sued
This article published in the Los Angeles Times, gives some good insight as to how Navient’s (remember Sallie Mae?) went about cheating student loan borrowers and the US government out of billions of dollars. The Consumer Financial Protection Bureau sued Navient for their mis-handling of student loan borrowers. The CFPB headed by Richard Cordray said that Navient “failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans.” Cordray went on to say “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them, and today’s action seeks to hold them accountable.”
The article describes how the company padded their profits by guiding unsuspecting borrowers into forbearance instead of helping them move to more advantageous income based repayments. Navient is accused of steering borrowers into higher payment plans because they were simpler for Navient to process even though they resulted in much higher payments for borrowers. When borrowers tried to enroll in more appropriate payment plans they were ignored and lied to by the customer representatives. Navient, although the largest, is just one of the servicers of student loans.
The article goes into some discussion of whether or not this lawsuit is politically motivated or not. They also discuss some of the possibilities of dismantling the CFPB once president elect Trump is in office.
You Need to Take Control of Your Student Loans
While all of this is extremely important for the wellbeing of consumers, I don’t want it to detract from the message you need to hear loud and clear.
You need to educate yourself on the best student loan repayment for your circumstances. You cannot count on the “advice” you receive from your servicer.
Some of the best resources available to educate yourself can be found at Federal Student Aid, a government website and the AAMC website on dealing with finances during residency.
Alway seek to understand how people and companies are compensated. It will save you a lot of financial pain over the years.