A new audit of the U.S. Department of Education found that federal student loan servicers - the companies that manage and collect payments on your student loans - failed in some cases to follow federal rules.
Here's what you need to know and what it means for your student loans.
The Audit
The Education Department's Office of Inspector General reviewed records from both the Obama and Trump administrations from 2015-2017. Among other findings, the audit found that Federal Student Aid (FSA), which is tasked with oversight of student loans, rarely penalized student loan servicers for failing to meet requirements. As a result, the rights of student loan borrowers may have been adversely impacted.
Key findings of the audit include:
- Lack of accountability provisions to hold servicers accountable for noncompliance.
- Lack of performance metrics for servicer compliance.
- Failure to hold servicers accountable could have led to servicers being paid more than they should have been.
- Failure by FSA employees to follow policy when evaluating the quality of servicer representatives’ interactions with borrowers.
Importantly, the audit notes that a student loan servicer's noncompliance with federal rules can result in FSA being refunded the servicing fee for student loans that were not serviced properly.
"This damning new audit is just the latest in a series of lawsuits and reports by law enforcement officials and government watchdogs showing the Department of Education is asleep at the switch while borrowers get hurt," said Seth Frotman, the former student loan ombudsman at the Consumer Financial Protection Bureau and now the Executive Director of the Student Loan Borrower Protection Center.
Navient: Student Loans Audit
This newest audit follows a 2017 U.S. Department of Education audit of student loan servicer Navient that included claims similar to ones raised in state and federal lawsuits against Navient that allege Navient steered borrowers into higher payment plans without discussing with borrowers potentially lower cost options.
As part of that audit, FSA listened to 2,388 phone calls, including 388 inbound and 2,000 outbound calls. Of these, FSA determined that 13 inbound and 207 outbound calls did not provide the borrowers with all of their options. For these 220 calls, Navient offered only forbearance. In the report obtained by The Associated Press, Navient refuted some of the conclusions contained in the audit, including, but not limited to, 168 of the 228 servicing opportunities. Navient also stated that its customer service representatives "followed proper call procedures and found the best solutions for borrowers."
Action Plan: 3 Steps
Here are some proactive steps that you can take to manage your student loans:
1. Know your student loan options
While your student loan servicer can help you understand options for student loan repayment, you should independently evaluate options that best match your personal financial situation. Don't rely solely on your student loan servicer for all the answers.
- Student Loan Refinancing
- Federal Student Loan Consolidation
- Income-Driven Repayment Plans
- Student Loan Forgiveness
2. File a complaint
If you feel you have been wronged by your student loan lender or your student loan servicer, you can file a complaint with:
- U.S. Department of Education
- Consumer Financial Protection Bureau
- Your lender
- Your servicer
3. Pay Off Your Student Loans Faster
Want to "ditch" your student loan servicer? You can also take these proactive steps to pay off your student loans faster.
These student loan calculators can help you understand your student loan repayment options.
