Student Loan Borrowers Dazed and Confused by Servicer Shuffle

The Department of Education has been transferring large batches of federal student loans to new loan-servicing companies — leaving in the lurch some borrowers who are suddenly encountering problems with their loans, such as payments that are mysteriously adjusted up or down.

The switch, which has been going on for months and will ultimately include millions of loans, is mandated by a little-known provision tucked into the 2010 healthcare overhaul. Pushed by a consortium of nonprofit student loan companies, the provision forces the DOE to use nonprofit loan servicers. But at least in the short run, the switch has caused problems.

Borrower Isabelle Baeck said that after a new servicer, Mohela, took over her loans in December, she received a letter saying that her monthly payments had been reduced to $50 — roughly a quarter of what they had been. The change meant Baeck would ultimately pay more in interest over a longer period of time. Concerned, she said she has made repeated calls to get the problem fixed, only to have the payments repeatedly readjusted.

A Mohela representative declined to comment on specific borrower situations but said that the company is working hard to minimize disruption and to resolve issues as they arise.

Baeck is not alone. Since last fall, one million borrowers have had their federal student loans randomly assigned to one of the new companies, all nonprofits or subsidiaries of nonprofit organizations. It is not known what proportion of borrowers has had problems during the switch.

Like their for-profit counterparts, many of these nonprofit student loan companies traditionally originated, bought and insured student loans, with the day-to-day servicing making up only a portion of their business. Several — including at least six that the department has transferred or is planning to transfer loans to — have been touched by scandal in those other capacities, with accusations ranging from bad lending practices toviolating state law to overbilling the Education Department.

In all, the Department of Education expects to add more than a dozen new servicers to the mix, roughly tripling the total number of companies that were handling direct federal loans this time last year. The move would also mean that borrowers with such loans would eventually be using about a dozen separate servicer websites, whereas before there was a single website for all direct loans.

Some worry the addition of so many new servicers could make standardization and oversight more challenging.

"It's hard to know if having more servicers will help or hurt because it's so bad with just a few right now,” said Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project. "Our fear is that the more you have, the less ability you have to oversee them.”

Ultimately, borrowers having their loans moved over to these new servicers have Congress to thank for it. Coupled with the passage of the health care reconciliation bill was an overhaul of federal student lending, which shifted the government away from backing loans by private lenders — what were known as federally guaranteed student loans — and toward loaning directly to students.

For-profit and nonprofit student loan companies alike lobbied over the change and shifted their business models accordingly. In particular, the nonprofit student loan companies won a carve-out to ensure they'd get in on the business of servicing the direct federal loans. The carve-out was crafted and lobbied for by the Education Finance Council, a trade group representing nonprofit student loan companies that spent more than $200,000 on lobbying that year. (The Education Finance Council did not respond to a request for comment.)

Now, two years later, borrowers are experiencing the effect of the law.

Borrower Karen Mahnk said she logged into the Department of Education's student loan website in October and saw that her loan balance — which typically hovered around $100,000 — was suddenly zero. When she called around, her servicer told her that she had been put in an administrative forbearance.

That didn't sit well with Mahnk, who said she didn't want to put off her payments and certainly didn't want to rack up additional interest. She said she called again and talked to someone else, who assured her the opposite — there was no record of forbearance.

While still confused about many details, Mahnk said she learned that her loan is being handled by a new servicer, a company called EdFinancial, which shows she's not due for a payment until June. Taking no chances, Mahnk said she has been forcing through monthly payments.

"I wanted to continue making payments regardless of what their problem was,” Mahnk explained. But she's still concerned about how things will shake out. "I'm only taking their word on it that my payment is fine, and that EdFinancial is going to do everything they're supposed to do.”

EdFinancial did not respond to a request for comment.

Some borrowers were notified of the switch only after the fact. "There was really no prior warning,” said Scott Trudeau, a borrower whose loans were transferred to Mohela in late January. Trudeau, who said he's never fallen behind on his loans, has had recurring problems since the switchover trying to correct his bank account information with Mohela.

"I get delinquency notices regularly, I get letters in the mail, but every time I try to give them money, the system breaks down,” he said. "I've had no trouble with the Department of Education all these years, but it's been nothing but confusion with Mohela.”

"Anytime you change a servicing relationship, it can cause concern,” said Will Shaffner, Mohela's director of business development and government relations. "They need to pick up the phone and call us. If they're not satisfied with our service or aren't getting answers, they should ask to speak with a supervisor. They can even get in touch with our CEO if they need to.”

The Department of Education's own implementation schedule shows that the transition is still a work in progress and the phasing in of new servicers is being pushed back.

"FSA has been working aggressively to implement the new not-for-profit servicers,” the document reads. "Our original schedule did not fully accommodate the level of effort required to bring up servicers in a way that minimizes risks for borrowers, FSA, and the not-for-profits themselves.”

source:www.propublica.org

The Student Access Loan Program

Effective 2015-2016 (FY 2016), Georgia Student Finance Authority offers the Student Access Loan (SAL) Program for eligible students attending an eligible USG (University System of Georgia), Private or TCSG (Technical College System of Georgia) postsecondary institution in Georgia.  The SAL is a 1% fixed rate loan, designed to assist undergraduate and technical college students who have a gap in meeting their educational costs.

Student Access Loan (SAL) Program Information

At an eligible USG (University System of Georgia) or Private postsecondary institutions in Georgia

• Applicants must have first applied for and exhausted all other student financial aid options including federal and state student loans, scholarship, and grant programs and Veterans Educational Benefits.
• Interest rate structure for loans received on or after July 1, 2014:
  • Fixed rate of 1% while in school and out of school as long as the loan remains in good standing.
  • A monthly Keep In Touch (KIT) Payment of $10.00 is required approximately 60 days after the first disbursement is received. The monthly KIT Payment is required while in school and while in grace period.
• Repayment is a maximum of fifteen (15) years with a minimum payment of $50.00 for loans received on or after July 1, 2015.
• The minimum annual loan amount is $500.
• The maximum term loan amount is $4,000.
• The maximum loan limit is $8,000 per year and up to a maximum of $36,000 over a college lifetime.
• The annual amount that an Applicant may be awarded under the SAL program is the cost of attendance less the student's expected family contribution and less the expected financial aid in accordance to the program regulations.
• Origination Fee - A non-refundable fee of 5% of the loan amount, but not more than $50.00, is deducted from the first disbursement of the loan.
• The program is also designed to provide service cancellation opportunities to USG or private postsecondary institutions students who work in select public service sectors or STEM fields.

At an eligible TCSG (Technical College System of Georgia) postsecondary institution

• Applicants must have first applied for and exhausted other student financial aid options including federal, state and private scholarship and grant programs and Veterans Education Benefits.
• Interest rate structure for loans received on or after July 1, 2014:
  • Fixed rate of 1% while in school and out of school as long as the loan remains in good standing.
  • A monthly Keep In Touch (KIT) Payment of $10.00 is required approximately 60 days after the first disbursement is received.  The monthly KIT Payment is required while in school and while in grace period.
• Repayment is a maximum of fifteen (15) years with a minimum payment of $50.00 for loans received on or after July 1, 2015.
• The minimum loan amount is $300.
• The maximum term loan amount is $1,500.
• The maximum loan limit is $3,000 per year and up to a maximum of $12,000 over a college lifetime.
• Origination Fee - A non-refundable fee of 5% of the loan amount, but not more than $50.00, is deducted from the first disbursement of the loan.
• The program is also designed to provide loan discharge to those TCSG students who graduate with a minimum 3.5 cumulative Grade Point Average in program of study for which the loan was received.

Student Eligibility

In order to receive the Student Access Loan, students must:

• Be considered a Georgia resident and United States citizen or eligible non-citizen.
• Complete a valid Free Application for Federal Student Aid (FAFSA) in order to apply for this program.
• Maintain Satisfactory Academic Progress (SAP) in accordance with the SAP policy at their college or university.
• Must be enrolled in an eligible Georgia postsecondary institution.
• Meet all eligibility requirements.

Important Things to Know

• The first selection of applications will be Current HOPE and Zell Miller Scholarship recipients in a random selection based on funds available. Any following selections of applications will be a random selection of the remaining applications based on funds available.
• Selection does not guarantee approval and applicants may or may not be selected each application year.
• SAL is an annual process which includes application, selection, certification, approval, and disbursement.
• Applications are only collected in pre-designated application cycle periods.  See the application link below for dates and information.
• If you apply for this loan, you understand that this is a private education loan that must be repaid and cannot be combined or consolidated with federal loans.
• Borrow smart! When applying for a loan, request only the amount of funds needed for your educational costs and that you can repay.
• Your eligible postsecondary institution may decline the loan or certify for a reduced amount based on financial aid status.
• Loan disbursements are sent directly to the student's chosen eligible postsecondary institution and are not transferable.

source: secure.gacollege411.org

Federal Direct Student Loan

The Federal Direct Student Loan is a low-cost loan based on demonstrated financial need. There are two types of loans:

1. Subsidized (you repay only the amount of the loan, while the government pays the interest it accrues while you're in school), and
2. Unsubsidized (you are responsible for repaying the amount of the loan and the interest it accrues while in school, although you can defer payment until after graduation).

The interest rate for a subsidized undergraduate Federal Direct Student Loan is generally lower than that of an unsubsidized loan.

Beginning with the Fall 2014 Semester, NGTC will no longer require students to complete a loan request form to request a Federal Direct Student Loan. Federal Direct Student Loans will be pre-packaged to all student accounts. The award amounts will be visible in BannerWeb. Upon acceptance of the Federal Direct Student Loan, you will receive an award letter via student email.

Click below for Instructions:

Instructions to Accept or Decline the Offer of Student Loans

Federal Direct loans take approximately 4-6 weeks to process.  If you anticipate need for a loan to help cover tuition, fees, or dormitory charges, please allow sufficient time to process the loan.

Student Access Loan Program (SAL)

Student Access Loans are designed to be the last funding resort for students who have a gap in their college financing. Please visit the following link for more information:

learn more

Private Loans

Private Loans are loans you receive through private credit unions, banks, etc. Private loans are typically given directly to students and have a higher interest rate than federal loans, so the amount you want to borrow may impact how many lender choices you have. An important thing to understand about this type of loan is that just because you've been approved for a loan one year, does not mean that you will be the next. You will have to re-qualify for each one.

Learn More

source:northgatech.edu

A deferment or forbearance allows you to temporarily postpone making your federal student loan payments or to temporarily reduce the amount you pay.

What is deferment?

A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed.

What happens to my loan during deferment?

During a deferment, you do not need to make payments.  What’s more, depending on the type of loan you have, the federal government may pay the interest on your loan during a period of deferment. 

The government may pay the interest on your

• Federal Perkins Loan,
• Direct Subsidized Loan, and/or
• Subsidized Federal Stafford Loan.

The government does not pay the interest on your unsubsidized loans (or on any PLUS loans). You are responsible for paying the interest that accrues (accumulates) during the deferment period, but your payment is not due during the deferment period. If you don’t pay the interest on your loan during deferment, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.

How do I request a deferment?

Most deferments are not automatic, and you will likely need to submit a request to your loan servicer, the organization that handles your loan account. If you are enrolled in school at least half-time and you would like to request an in-school deferment, you’ll need to contact your school’s financial aid office as well as your loan servicer.

Your deferment request should be submitted to the organization to which you make your loan payments.

• Direct Loans and FFEL Program loans: contact your loan servicer
• Perkins Loans: contact the school you were attending when you received the loan

What is forbearance?

If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans).  

There are two types of forbearances:

• Discretionary
• Mandatory 

Discretionary Forbearance

For discretionary forbearances, your lender decides whether to grant forbearance or not.

You can request a discretionary forbearance for the following reasons: 

• Financial hardship
• Illness

Mandatory Forbearance

For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your lender is required to grant the forbearance.

You can request a mandatory forbearance for the following reasons:

• You are serving in a medical or dental internship or residency program, and you meet specific requirements.
• The total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income (additional conditions apply).

• You are serving in a national service position for which you received a national service award.

• You are performing teaching service that would qualify for teacher loan forgiveness.
• You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
• You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.

How do I request a forbearance?

Receiving loan forbearance is not automatic. You must apply by making a request to your loan servicer. In some cases, you must provide documentation to support your request.

What happens to the interest on my loan during forbearance?

Interest will continue to be charged on all loan types, including subsidized loans. 

You can pay the interest during forbearance or allow the interest to accrue (accumulate). If you don’t pay the interest on your loan during forbearance, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.

source: studentaid.ed.gov

In certain situations, you can have your federal student loan forgiven, canceled, or discharged.

When can my federal student loans be forgiven, canceled, or discharged?

You must repay your loans even if you don’t complete your education, can’t find a job related to your program of study, or are unhappy with the education you paid for with your loan.  However, certain circumstances might lead to your loans being forgiven, canceled, or discharged.

Total and Permanent Disability (TPD) Discharge

A TPD discharge relieves you from having to repay a William D. Ford Federal Direct Loan (Direct Loan) Programloan, Federal Family Education Loan (FFEL) Program loan, and/or Federal Perkins Loan (Perkins Loan) Program loan or complete a TEACH Grant service obligation on the basis of your total and permanent disability. Before your federal student loans or TEACH Grant service obligation can be discharged, you must provide information to the U.S. Department of Education (ED) to show that you are totally and permanently disabled. ED will evaluate the information and determine if you qualify for a TPD discharge.

You can show that you are totally and permanently disabled in one of the following three ways:

1. If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs (VA) showing that the VA has determined that you are unemployable due to a service-connected disability.
2. If you are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can submit a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination.
3. You can submit certification from a physician that you are totally and permanently disabled. Your physician must certify that you are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that

• Can be expected to result in death,
• Has lasted for a continuous period of not less than 60 months, or
• Can be expected to last for a continuous period of not less than 60 months.

For more information, go to Total and Permanent Disability Discharge.

Death Discharge

If you, the borrower, die, then your federal student loans will be discharged.  If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies. 

The loan will be discharged if a family member or other representative provides a certified copy of the death certificate to the school (for a Federal Perkins Loan) or to the loan servicer (for a Direct Loan or FFEL Programloan). For more information, contact your loan servicer.

Discharge in Bankruptcy

This is not an automatic process—you must prove to the bankruptcy court that repaying your student loan would cause undue hardship.

If you file Chapter 7 or Chapter 13 bankruptcy, you may have your loan discharged in bankruptcy only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request. The court uses this three-part test to determine hardship:

• If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
• There is evidence that this hardship will continue for a significant portion of the loan repayment period.
• You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

Your loan will not be discharged if you are unable to satisfy any one of the three requirements. If your loan is discharged, you will not have to repay any portion of your loan, and all collection activity will stop. You also willregain eligibility for federal student aid if you had previously lost it.

False Certification of Student Eligibility or Unauthorized Payment Discharge

You may be eligible for a discharge of your Direct Loan or FFEL Program loan in these circumstances:

• Your school falsely certified your eligibility to receive the loan based on your ability to benefit from its training, and you did not meet the ability to benefit student eligibility requirements.
• The school signed your name on the application or promissory note without your authorization or the school endorsed your loan check or signed your authorization for electronic funds transfer without your knowledge, unless the proceeds of the loan were delivered to you or applied to charges owed by you to the school.
• Your loan was falsely certified because you were a victim of identity theft.
• The school certified your eligibility, but because of a physical or mental condition, age, criminal record, or other reason you are disqualified from employment in the occupation in which you were being trained.

Unpaid Refund Discharge

You may be eligible for a discharge of your Direct Loan or FFEL Program loan if you withdrew from school, but the school didn’t pay a refund that it owed to the U.S. Department of Education or to the lender, as appropriate. Check with the school to see how refund policies apply to federal aid at the school.

Only the amount of the unpaid refund will be discharged. You may qualify for this partial discharge whether the school is closed or open. Contact your loan servicer for more information.

Teacher Loan Forgiveness

If you are a teacher and also a new borrower (i.e., you did not have an outstanding balance on a Direct Loan or FFEL Program loan on Oct. 1, 1998, or on the date you obtained a Direct Loan or FFEL Program loan after Oct. 1, 1998) and have been teaching full-time in a low-income elementary or secondary school or educational service agency for five consecutive years, you may be able to have as much as $17,500 of your subsidized or unsubsidized loans forgiven. Your PLUS loans cannot be included. For more information, go to Teacher Loan Forgiveness. If you have a Federal Perkins Loan, see Perkins Loan Cancellation for teacher cancellation in that loan program.

Public Service Loan Forgiveness

If you are employed in certain public service jobs and have made 120 payments on your Direct Loans (after Oct. 1, 2007), the remaining balance that you owe may be forgiven. Only payments made under certain repayment plans may be counted toward the required 120 payments. You must not be in default on the loans that are forgiven. For more information, go to Public Service Loan Forgiveness.

Perkins Loan Cancellation and Discharge

The following Federal Perkins Loan Program cancellations apply to individuals who perform certain types of public service or are employed in certain occupations.

For each complete year of service, a percentage of the loan may be canceled. The total percentage of the loan that can be canceled depends on the type of service performed. Depending on the type of loan you have, and when that loan was taken out, you may be eligible to cancel part of or your entire loan if you have served as one of the following:

• Volunteer in the Peace Corps or ACTION program (including VISTA)
• Teacher
• Member of the U.S. armed forces (serving in area of hostilities)
• Nurse or medical technician
• Law enforcement or corrections officer
• Head Start worker
• Child or family services worker
• Professional provider of early intervention services

There is no standard application form for Perkins Loan cancellations. Contact the school that you were attending when you received the loan.

View the Perkins Loan Cancellation and Discharge Summary Chart.

How do I find out if I qualify and how do I apply to have my loan forgiven, canceled, or discharged?

After reviewing the conditions, if you think you qualify, contact your loan servicer. If you have a Federal Perkins Loan, you must apply to the school that made the loan or contact the loan servicer the school has designated.

Certain types of cancellations are available to military personnel, teachers, nurses, child care providers, or borrowers affected by the closure of a school. Provisions differ depending on the type of loan you have. You can view your loan information including the types of loans you have and your loan servicer by logging in to My Federal Student Aid.

Do I need to make payments while my discharge application is being reviewed?

Yes. Until you hear whether your discharge has been approved, you should continue making payments on your loan to prevent it from going into default or accruing (accumulating) additional interest. However, note the following:

• If you have a Direct Subsidized Loan, Direct Unsubsidized Loan, Federal Subsidized Stafford Loan, or Federal Unsubsidized Stafford Loan, you can be granted forbearance. Your loan servicer should grant forbearance until a decision is made on your application. If forbearance is granted, no one is permitted to collect on your loan until it is determined whether you are eligible for a loan discharge.
• If you have a Federal Perkins Loan, schools automatically defer your loans if you are performing service (such as teaching in a low-income school) that will qualify you for loan cancellation. Check with your school for details.

What happens if my loan discharge is approved?

If you qualify for a complete discharge of your loan, you are no longer obligated to make loan payments. Depending on the type of loan discharge program for which you may be eligible, the U.S. Department of Education may be required to refund to you some or all of the payments you made on the loan. In addition, any adverse credit record related to a default might be deleted, and no tax refund offset or wage garnishment will take place to collect on the discharged loan. If the loan was in default, the discharge may erase the default status. If you have no other defaulted loans, you regain eligibility for federal student aid.

Note: In some cases, your school might be required to refund a portion of a Direct Loan or FFEL Program loan to the U.S. Department of Education (for example, you withdrew from school within a timeframe that required a refund of loan funds). If your school fails to make that refund, that portion of your loan will be canceled, but you will be responsible for paying any remaining amount.

What happens if my loan discharge is denied?

For most discharges, the final decision on whether to discharge the loan cannot be appealed. The two exceptions arefalse certification and forged signature discharges. If you receive these types of discharges, you may ask the U.S. Department of Education to review the denial.

If your loan discharge is denied, you remain responsible for repaying the loan. Talk to your loan servicer about repayment options if you have a Direct Loan or FFEL Program loan. Check out repayment options.

If your loan is in default, go to Understanding Default for more information.

If your school has closed, you should also explore the following options if your discharge application is denied:

• Contact the state licensing agency and ask if there is a tuition recovery fund or performance bond that will cover your damages based on the school closure.
• If the school filed bankruptcy, you should file a claim for your loss in the bankruptcy proceeding. You also might want to consult an attorney about any options you may have through the court system.

Common Questions

The following are some common questions about loan forgiveness, cancellation, or discharge.

I was very young when I borrowed this money. Do I still have to pay?

Yes.  The fact that you didn’t fully understand the implications of getting a loan, or the fact that it’s been many years since you signed for the loan, does not mean that you do not have to pay.

I signed the Master Promissory Note but I didn't attend class. Do I still have to pay?

If you received the proceeds of a loan but never attended classes, you are obligated to return the funds immediately.  Your school will return any funds that it received and applied to your account.  If you do not return the funds that you directly received, your loan will be placed in default.

I’m a parent that took a PLUS loan to help pay for my child’s education. Can my loan ever be forgiven, canceled, or discharged?

You must repay your parent PLUS loan even if the student doesn’t complete his or her education or can’t find a job related to the program of study, or if you or the student is unhappy with the education. However, the loan may be discharged if the child for whom you borrowed dies, or if you die or become totally and permanently disabled.

We may discharge some or all of your loan in any of these circumstances:

• The school closed before the student completed the program.
• The school forged the signature on your promissory note or falsely certified that you were eligible for aid.
• The loan was falsely certified through identity theft.
• The student withdrew from school but the school didn’t pay a refund that it owed. Check with the school to see how refund policies apply to federal aid at the school.
• The loan was discharged in bankruptcy claim. This is not an automatic process—you must prove to the bankruptcy court that repaying the loan would cause undue hardship.

Contact your loan servicer for more information. If you don’t know who your loan servicer is, visit My Federal Student Aid.

source: studentaid.ed.gov