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Changes Coming to Student Loan Servicing

By U.S. News & World Report

In March 2015, President Barack Obama made a pledge to students and student loan borrowers in the form of the Student Aid Bill of Rights. In addition to promising easier access to higher education and the means to pay for it, the pledge resolved to allow all borrowers to receive “quality customer service, reliable information, and fair treatment as they repay their loans.” Last week, the Department of Education issued a playbook of sorts of how it intends to fulfill this objective.

Over the last few years, the Department of Education and the Consumer Financial Protection Bureau have collected complaints and other feedback from borrowers, members of the student loan industry and consumer advocates. One of the most frequent complaints was about borrowers’ confusion when their loans were held by multiple servicers, who may have differing policies or procedures.

In response, in 2014, the department asked how the current platform of 11 different servicers could better respond to the 40 million student loan borrowers. The answer? Just have one servicer.

As a result, the department is choosing a single servicer, who will create a student loan servicing “ecosystem” that is intended to be the single point of contact and managing system for all federally held student loans. There will still be multiple servicers, but that should be invisible to borrowers. That was the first step.

Step 2 appears to be the new directive describing how this future “ecosystem” should respond to student loan borrowers and their needs. These rules should be implemented immediately within the new system, but may require regulatory or statutory action for those federal loans not directly held by the department, such as the Federal Family Education Loan Program and Perkins loans. Below are some of the highlights of what borrowers can expect.

[Prepare to ask these three questions before refinancing student loans.]

— A single web portal for all federally held loans and a standard communication format branded with the Department of Education logo. Borrowers will no longer need to know the name of their servicer to manage their loans.

— Standard customer service practices to ensure a “consistent customer experience.”

— More oversight, accountability and transparency of all student loan service providers, and greater incentive for providers to keep borrowers current on their payments and assist those at high risk for delinquency and default.

— Specially trained personnel to assist high-risk borrowers and those in the military.

— Proactive communication to ensure borrowers on income-driven plans are aware when it’s time to recertify their plan and help them if their applications are incomplete.

— Increased call center hours, account access and payment methods, including the use of mobile technology.

— Larger payments than due that are submitted without instructions will have the excess applied in a way that saves borrowers the most money. Borrowers will also be able to go online to provide instructions on how to allocate extra payments. Payments may be reallocated retroactively if requested.

— Payments less than what is due will be applied in the way that keeps the most loans current.

— Increased access to detailed account information.

— Servicers will develop a “comprehensive complaint resolution plan” that dovetails with the department’s own recently launched feedback system. Complaints will be handled consistently and in a timely manner. Borrowers should expect acknowledgment of their complaint within 15 days and resolution within 60 days.

[Learn the five steps to file a student loan complaint.]

— The department will receive all complaint information — as will the Federal Trade Commission’s Consumer Sentinel system. This system is accessible by agencies such as the Department of Veterans Affairs, the Consumer Financial Protection Bureau and the Department of Defense.

— The department will publicize data, including: servicer performance; loan portfolio characteristics; average phone – answering time; number of disputes and the percentage of those resolved in favor of the borrower; account characteristics including borrower status, payment methods and payment plan choice; and characteristics of defaulted borrowers.

While many servicers already offer this level of service, not all borrowers have had this experience. The Department of Education’s goal is to increase consistency, accuracy, accountability and transparency for the whole federal student loan system.

The Student Loan Ranger applauds this initiative. Student loans can be a heavy burden for some borrowers — how their loans are managed shouldn’t be part of that burden.

More from U.S. News

How Arbitration Helps, Hurts Defrauded Student Loan Borrowers

Understand Student Loan Forbearances, Rehabilitation Payments

Defrauded Student Loan Borrowers May Soon Have Discharge Options

Changes Coming to Student Loan Servicing originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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