U.S. students are still largely on their own to protect themselves when they are struggling to repay their debt, despite the government's condemnation of some education loan servicers' unfair, deceptive and illegal practices.
The Consumer Financial Protection Bureau has found one or more student loan servicers had charged illegal late fees, inflated minimum payment requirements and made illegal debt collection calls.
They also misled consumers about bankruptcy protections, saying student loans were never dischargeable in bankruptcy. (They are, although they are quite difficult to win.)
Consumer advocates have long complained that servicers did not always inform borrowers, especially those with federal student loans, about their repayment options.
Federal loans offer a number of repayment plans, including income-based programs that can reduce monthly payments to less than 10 percent of the borrower's income. Private student loans typically offer far fewer plans.
Difficulty getting help from servicers has spawned a legion of scam artists who promise to hook borrowers up with bogus debt relief programs in exchange for high fees. Ads and telephone pitches cite the nonexistent "Obama Forgiveness Program," while some companies charge hundreds of dollars to fill out paperwork for free government programs.
Students should avoid any company that charges an upfront fee and instead try these tactics:
Be proactive. Do not expect this debt to go away, and do not wait for servicers to track you down. Student loan debt "can run after you forever," said Deanne Loonin, director of the National Consumer Law Center's Student Borrower Assistance Project. Contact servicers to let them know your situation and to ask about alternatives.
Educate yourself. Become familiar with alternatives so you can discuss them knowledgeably with servicer representatives. "Let them know you know there are options available, and you're more likely to get quality service," Loonin said.
Repayment options for federal loans are outlined on the U.S. Department of Education site and on the National Consumer Law Center's Student Borrower Assistance Project site, which also has suggestions for dealing with private lenders.
Be persistent. If a front-line servicer employee will not or cannot help you, ask to speak to the supervisor. If that does not work, contact the Federal Student Aid Ombudsman Group for help with federal loans. You also can file a complaint with the Consumer Financial Protection Bureau whether the loan is federal or private.