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CommonWealth Magazine

CommonWealth Magazine
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In the first six months From existence, the Ombudsman’s Office tasked with handling complaints related to the student loan industry has received 393 complaints and requests for assistance.

The complaints came despite the fact that the Biden administration has temporarily halted paying federal student loans during the pandemic.

Senator Eric Lesser, a Democrat from Longmeadow, sponsored the bill that created the Office of the Ombudsman.

a upload report With the legislature this week by the ombudsman, who works in Attorney General Maura Healey’s office, he gave a first glimpse of the completely new office, created in the economic development bill that Governor Charlie Baker signed into law last January. The report also provides insight into the problems facing the student loan industry.

“Working with borrowers, the Ombudsman’s Student Loan Assistance Unit has found that the current federal loan repayment system is so complex and plagued by service failures that it has trapped borrowers in unsustainable debt,” Investigator Erwin Thoman wrote. “Even with federal income-based payment plans, borrowers often face long-term and expensive debt burdens.”

Thoman wrote that borrowers who took out private loans, rather than those provided by the federal government, fared worse, because they “usually have more expensive loans and fewer options for repayment management.”

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

According to the report, the bureau received 116 complaints against student loan servicing, and another 76 complaints about debts related to for-profit schools. There have been a few additional complaints regarding non-profit schools or public schools and student loan debt forgiveness companies.

Most complaints against servants — 72 percent — were split evenly between two student loan servants: the Pennsylvania Higher Education Aid Agency and Navint. Both are major national companies whose loan-collection practices have drawn criticism.

Helly secured last February settlement With the Pennsylvania Agency after it sued the company claiming it made mistakes and provided false information to borrowers about loan forgiveness and repayment programs, causing borrowers to deviate from the repayment path and lose months of loan forgiveness.

US Senator Elizabeth Warren, a Democrat from Massachusetts, accused Navent of problematic practices, including raising fees for service members, turning borrowers away from income-based payment plans, and failing to inform borrowers of their rights.

Another 10 percent of the complaints the ombuds received relate to the Massachusetts Education Funding Authority, a legislatively created nonprofit lender whose loans are served by a subsidiary of the Pennsylvania Higher Education Aid Agency.

With more than 100,000 borrowers, the agency “values ​​high-quality customer service, addresses every customer concern, and provides flexible loan repayment solutions,” said Lisa Rooney, a spokeswoman for the Massachusetts Education Finance Corporation, in a statement. “We have a strong working relationship with the Office of the Student Loan Ombudsman, and we appreciate the role it will play in providing an independent resource to borrowers seeking guidance on repaying their loans,” she added.

About two-thirds of the complaints relate to failure to provide affordable payment options, misinformation, or disputes about payments related to the Public Service Loan Forgiveness Program.

The office also received requests for assistance: 148 borrowers requested assistance in exploring student loan repayment options, 136 borrowers requested assistance with information on their student loans, and 89 requested assistance in getting out of default and avoiding wage withholding. (Some borrowers had multiple complaints or requests.)

The report did not mention any type of enforcement action or investigations against student loan providers, but noted that the office generally focused on helping borrowers obtain information — about their loans, repayment plans and options for resolving defaults.

Of those who sought help, 319 took out federal loans and 105 got loans from private companies. Since reforms to the student loan industry in 2010, most loans have been made by the federal government. But earlier loans likely came from private lenders, and some borrowers today may still turn to a private lender if they want more money than they can get from the federal government or can’t get a federal loan.

The report identified several systemic problems in the student loan system. For example, borrowers who can get access to income repayment plans still end up with payments they can’t afford, onerous annual rehab requirements, increased loan balances, and long repayment terms. Forgiving borrowers—a temporary postponement of payment due to economic hardship—can find that their interest is accumulating and they are facing a heavy debt burden with no opportunity for loan forgiveness. Borrowers who pay late are often unaware that late payments lead to accrued interest, and that less money will be paid for the principle of the loan.

Overall, 191 of the borrowers (60 percent) who contacted the bureau said their federal loan payments were “unreasonable” or “unaffordable,” while only 50 (16 percent) rated their payments as “affordable” or “affordable.” the cost”. Only 21 percent of federal student loan borrowers reported that their federal loan balance had decreased over time, while 57 percent said it had not.

Private lenders offer less payment flexibility to economically distressed borrowers, and 68 percent of these borrowers describe their payments as unsustainable, while only 9 percent consider them affordable. Among those who took out private loans, 34 percent said their credit declined over time, while 56 percent said it did not.

Another part of the student loan invoice requires the banking department to set up a licensing system for student loan services. Publish the new section Rules Student loan custodians ruled last summer. Less expectation that over time, this will change behavior by student loan providers, because segmentation can create and enforce rules.

“In the earlier era, the Wild West was disorganized,” Lesser said. “The state had very few tools to enforce good behaviour.”

Healy, in a statement, described the student loan system as “fundamentally disruptive and devastating to countless Americans,” noting that Americans now owe $1.8 trillion in student debt.

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on Shera Schoenberg

Shira Schoenberg is a reporter for The Commonwealth Magazine. Chera previously worked for more than seven years at Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as launching the legal marijuana industry, issues with the state’s foster care system and US Senate elections. Elizabeth Warren and Governor Charlie Baker. Shira won the 2018 Massachusetts Bar Association Award for Excellence in Legal Journalism and has multiple award winning stories from The New England Journalism and the Press Association. Chera covered the 2012 New Hampshire presidential primary for the Boston Globe. Prior to that, she worked at Concord Monitor, where she wrote about state government, city council, and Barack Obama’s 2008 New Hampshire primary campaign. Shira holds a master’s degree from Columbia University’s Graduate School of Journalism.

on Shera Schoenberg

Shira Schoenberg is a reporter for The Commonwealth Magazine. Chera previously worked for more than seven years at Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as launching the legal marijuana industry, problems with the state’s foster care system and the US Senate elections. Elizabeth Warren and Governor Charlie Baker. Shira won the 2018 Massachusetts Bar Association Award for Excellence in Legal Journalism and has multiple stories that have won awards from the Newspaper and Press Association of the New England Newspaper and Press Association. Chera covered the 2012 New Hampshire presidential primary for the Boston Globe. Prior to that, she worked at Concord Monitor, where she wrote about state government, city council, and Barack Obama’s 2008 New Hampshire primary campaign. Shira holds a master’s degree from Columbia University’s Graduate School of Journalism.

“My office helps students navigate this complex system every day and sees how this system and the associated debt burden prevent families from buying a home or a car, saving for retirement, or investing in their children,” Healy said. “While the Student Loan Assistance Unit has helped thousands of borrowers get their loans and secured millions of dollars in relief, the federal loan repayment system continues to lock students into unsustainable debt, loan providers are still not doing their job, and private loan options are usually worse.” .

Healy said that in addition to helping local borrowers, the US Department of Education is advocating for improved repayment plans, and is pushing for federal loan forgiveness. Although Biden has temporarily halted student loan payments during the pandemic, some progressive advocates, such as Warren, have called for him to forgive up to $50,000 of federal student debt entirely.

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