CommonWealth Magazine


IN ITS FIRST SIX MONTHS In existence, an ombudsman’s office responsible for handling complaints regarding the student loans sector received 393 complaints and requests for assistance.

The complaints came despite the Biden administration putting on hold on federal student loan repayments during the pandemic.

“Considering the number of complaints they are filing, given that there has been a suspension or lull related to COVID, it shows how important and necessary the law was,” said Senator Eric Lesser, a Democrat of Longmeadow who sponsored the bill creating the office of the ombudsman. .

A report filed with the legislature this week by the ombudsman, who works in attorney general’s office maura healey, gave a first look at the brand new office, which was created in an economic development bill that governor charlie baker has signed last January. The report also provides an overview of issues related to the student loan industry.

“In working with borrowers, the Ombudsman’s Student Loans Assistance Unit has consistently found that the current federal loan repayment system is too complex and plagued by service failures that have trapped borrowers in unaffordable debt, ”wrote ombudsman Arwen Thoman. “Even with income-driven federal repayment plans, borrowers often face a long-term and costly debt burden.”

Borrowers who have received private loans, rather than those offered by the federal government, have fared less well, Thoman wrote, because they “generally have more expensive loans and fewer options to manage repayment.”

The office has a dual role: it helps borrowers by providing information and advice on their student loans and repayment plans, and it investigates complaints made to student loan service companies and resolves disputes. Student loan managers are companies that contract with the government or a lender to collect student loan payments.

According to the report, the office received 116 complaints against student loan officers and 76 other complaints about debts related to for-profit schools. There have been a small number of additional complaints involving public or nonprofit schools and student debt relief companies.

Most complaints against repairers – 72% – were split evenly between two student loan managers: the Pennsylvania Higher Education Assistance Agency and Navient Corporation. Both are large national corporations whose loan collection practices have drawn criticism.

Healey last February insured a colony with the Pennsylvania agency after suing the company, alleging it made mistakes and misinformed borrowers about loan cancellation and repayment programs, causing borrowers to derail in their repayment and lost months of loan cancellation.

U.S. Senator Elizabeth Warren, a Democrat from Massachusetts, accused Navient of problematic practices, including overcharging service members, keeping borrowers away from income-based repayment plans, and failing to inform borrowers of their rights.

Another 10 percent of complaints received by the ombudsman concerned the Massachusetts Education Finance Authority, a statutory nonprofit lender whose loans are administered by an affiliate of the Pennsylvania Higher Education Assistance Agency.

Lisa Rooney, spokesperson for the Massachusetts Education Finance Authority, said in a statement that with more than 100,000 borrowers, the agency “values ​​high quality customer service, addresses all customer concerns and provides solutions. flexible loan repayment terms “. She added, “We have a strong working relationship with the Office of the Student Loans Ombudsman, and we appreciate the role it will play in providing an independent resource for borrowers seeking advice on repaying their loans.

About two-thirds of the complaints were about failure to provide affordable repayment options, misinformation, or payment disputes related to a public service loan cancellation program.

The office has also received requests for help: 148 borrowers requested help exploring their student loan repayment options, 136 requested help with information about their student loans, and 89 requested assistance. help to get out of a default and avoid wage garnishment. (Some borrowers have had multiple complaints or requests.)

The report did not note any type of enforcement action or investigation against student loan managers, but it did indicate that the office generally focused on helping borrowers get information – about their loans, their loans, their loans. repayment plans and options to resolve payment defaults.

Of those who asked for help, 319 had federal loans and 105 had private business loans. Since reforms to the student loan sector in 2010, most loans have come from the federal government. But past loans are likely to have come from private lenders, and some borrowers today may still turn to a private lender if they want more money than they can get federally or if they cannot get a federal loan.

The report identified several systemic issues with the student loan system. For example, borrowers who can secure income repayment plans still end up with payments they can’t afford, heavy annual requirements for recertification, growing loan balances, and long repayment terms. Forbearance borrowers – a temporary suspension of payments due to economic hardship – may find their interest accruing and facing a heavy debt burden with no possibility of loan cancellation. Borrowers who pay late are often unaware that late payments result in accrued interest and less money to pay off the loan principle.

Overall, 191 borrowers (60%) who contacted the office said their federal loan payments were “not affordable” or “very unaffordable”, while only 50 (16%) classified their payments as “Affordable” or “very affordable”. Only 21 percent of federal student loan borrowers said their federal loan balance had declined over time, while 57 percent said it had not.

Private lenders offer less repayment flexibility to borrowers facing economic difficulties, and 68% of these borrowers find their payments unaffordable, while only 9% find them affordable. Of those with private loans, 34% said their balances had gone down over time, while 56% said no.

Another part of the student loan bill requires the Banking Division to establish a licensing system for student loan services. The division published news rules governing student loan managers last summer. Lesser predicted that over time this will lead to a change in behavior on the part of student loan managers as the division can create rules and enforce them.

“In the days before, it was the Wild West, unregulated,” Lesser said. “The state had very few tools to enforce good behavior. “

Healey, in a statement, called the student loan system “fundamentally shattered and devastating to countless Americans,” noting that Americans now owe $ 1.8 trillion in student debt.

Meet the author

Journalist, Commonwealth

On Shira Schönberg

Shira Schoenberg is a reporter for CommonWealth magazine. Shira previously worked for over seven years at the Springfield Republican / MassLive.com where she covered state politics and elections, covering topics as diverse as starting the legal marijuana industry, issues with the state foster care system and the elections of US Sen Elizabeth Warren and Governor Charlie Baker. Shira won the 2018 Massachusetts Bar Association Award for Excellence in Legal Journalism and several articles won awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Prior to that, she worked for the Concord (NH) Monitor, where she wrote about state government, city hall, and Barack Obama’s primary campaign in New Hampshire in 2008. Shira is the incumbent of a master’s degree from the Graduate School of Journalism at Columbia University.

On Shira Schönberg

Shira Schoenberg is a reporter for CommonWealth magazine. Shira previously worked for over seven years at the Springfield Republican / MassLive.com where she covered state politics and elections, covering topics as diverse as starting the legal marijuana industry, issues with the state foster care system and the elections of US Sen Elizabeth Warren and Governor Charlie Baker. Shira won the 2018 Massachusetts Bar Association Award for Excellence in Legal Journalism and several articles won awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Prior to that, she worked for the Concord (NH) Monitor, where she wrote about state government, city hall, and Barack Obama’s primary campaign in New Hampshire in 2008. Shira is the incumbent of a master’s degree from the Graduate School of Journalism at Columbia University.

“My office helps students navigate this complex system every day and sees how this system and the associated debt burden are preventing families from buying homes, cars, saving for retirement, or investing in their own. kids, ”Healey said. “While our student loan assistance unit has helped thousands of borrowers get their loans and secured millions of dollars in assistance, the federal loan repayment system continues to trap students in unaffordable debt, Loan officers still don’t do their jobs, and private loan options are generally worse.

Healey said that in addition to helping local borrowers, she is calling on the US Department of Education to improve repayment plans and pushing for the cancellation of federal loans. Although Biden suspended student loan payments during the pandemic, some progressive advocates, like Warren, have called on him to write off up to $ 50,000 in federal student debt.

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