Pressure on Student Loan Servicers by State Laws May Ease Up
Millions of borrowers in the US are under substantial pressure to pay back student loans that may require average monthly payments of over $350 for those in the 30 and younger age range. And while this may have been part of the commitment when signing loan contracts, many rising students lack the life experience to understand what they are promising—and how difficult it may be to follow through. Overextended borrowers may find themselves stressed out and unhappy later, as well as forced to put off typical life milestones such as buying homes, getting married, or deciding to have kids. Parents may also take on the brunt of many student loans for their older children.
For those who are delinquent or defaulting, action by student loan servicers may be aggressive as they fight to collect their debts. Borrowers have seen some retribution for wrongs done to them, however, as in the recent case of Navient. The student loan servicer was accused of misallocation of payments, overcharging for interest, and misguidance regarding repayment programs. In other instances, borrowers have also been on the winning side as debt collection companies like GC Services have received significant fines for making mistakes in handling accounts and harassing debtors. While many borrowers may not receive any relief on their loans due to these legal actions, it has been encouraging to see some level of accountability for errors.
“Congress created and expanded the Direct Loan Program with the goal of simplifying the delivery of student loans to borrowers, eliminating borrower confusion, avoiding unnecessary costs to taxpayers, and creating a more streamlined student loan program,” says the memo. “Recently, several States have enacted regulatory regimes or applied existing State consumer protection statutes that undermine these goals.”
This also comes on the heels of last year’s announcement by the Education Department that they would no longer work with the Consumer Financial Protection Bureau (CFPB) regarding loan servicer oversights. Because of such changes, states have been working to oversee loan servicers and handle inappropriate action.
“This is a radical change,” says Christopher Peterson, law professor at the University of Utah and former enforcement attorney at the CFPB.
Twenty-six state attorneys involved in a bipartisan group have asked the Department to reject such ‘immunity’ for loan servicers and their associated debt collection agencies.
“There is no principled reason for the Department to weaken or box out states just as our combined federal-state efforts against abusive practices in the student loan servicing industry have begun to bear fruit,” the attorneys general wrote. “Nor is there any justification to seek to interfere with the traditional police power of states to protect their own residents from abuses in the marketplace.”
Have you experienced problems with your loan service provider, or are you in danger of defaulting on your student loan? Contact Fitzgerald & Campbell, APLC now so one of our experienced student loan debt attorneys can review your case and discuss all the available options with you.
Our attorneys have decades of experience in serving clients as they navigate through challenging financial situations, to include student loan issues, bankruptcy and other debt management processes. We are here to help! Call us today for a free consultation at (855) 709-5788 or email us at email@example.com.
Posted in: Student Loan Debt