The Obama administration has recently proposed a new set of guidelines that would apply to direct federal student loan servicers. These guidelines seek to shift the focus of companies like Navient and Nelnet from a collections role to a counseling role intended to help guide borrowers down the path of paying off their student loan debt.
This shift in focus would come as a welcome change to anyone who has experience with the collection efforts of companies like Navient (formerly Sallie Mae) and Nelnet. Both organizations are notorious for robo-calling borrowers, harassing borrowers once they have them on the phone, and being unreasonable in their payment demands. The most frequent cause for complaints filed with the CFPB when it comes to student loans stem from interactions borrowers have with their loan servicers.
These new guidelines will come into existence through a number of directives being passed down from the Department of Education to the Federal Student Aid office. Through these directives, the shift in focus from a collections role to a counseling role is very evident. The directives include things such as: requiring services to inform delinquent borrowers of income-based repayment options before demanding payment, make legitimate attempts to contact borrowers at-risk of defaulting and counseling them about their repayment options, and ensuring that income-based repayment plan applications are processed in a reasonable time.
The goal of these new guidelines is to stem the surge of growing defaults before this trend has a larger effect on our national economy. Over the last three financial quarters more than 880,000 borrowers have defaulted on their Department of Education backed loans. Many are calling for a change in student loan policy to come before we see a financial crisis like occurred in 2008 with the housing market. With the housing market it took a financial collapse to get consumer protections put into place in the mortgage industry. Many would hope that it doesn’t take a similar collapse for student loans to get the reform they require.
While these new guidelines are a positive step in the right direction, they will only help those borrowers with federal student loans. If you are a borrower with private student loans, these guidelines and reforms will not apply to you. You will be at the mercy of your student loan servicer.
If you are having issues with your student loans, and particularly your private student loans we would love to hear from you. McCarthy law focuses on providing solutions to private student loan borrowers who are struggling to repay their debt. We can be reached at McCarthy Law PLC (855)-976-5777.