As if students carrying a record load of debt didn’t have enough to worry about, they might be getting set up to fail and render themselves ineligible for the programs that could help them. It’s bad enough that collection agencies and loan originators are seemingly profiting from the most vulnerable debtors, but a disturbing new report from the CFPB that addresses the difficulties of the most economically disadvantages debtors transitioning from being in default into an income based repayment plan through a process called rehabilitation. In some cases, student loan borrowers were so far down the economic ladder that they could not make $5.00 per month payments, and out of 650,000 rehabbed loans, 220,000 were expected to fall into default again.
The report also looks at the compensation delivered to these servicing and collections companies, where regardless of performance or monies collected, compensation can hit the 40:1 mark. That’s right – $40.00 paid out for every $1.00 brought in for rehabbing defaulted loans, even if the student loan borrower defaults again. Sweet gig, isn’t it? No wonder the financial industry wants to keep those big federal cash taps open. Issues for private student loan servicers were also predictable across Navient, AES/PHEAA, Sallie Mae, Wells Fargo, and Transworld – the top complaint was communication and dealing with the lender or servicer, and the runner up was the inability to pay the loan.
When you consider that those in the most danger of default are those who owe less than $10,000, and may not have been able to complete their course of study, it’s even more infuriating. For whatever reason – closed or fraudulent school, sickness or family obligation – these students are left without the degree or certification that they need to get a good job to repay their loans and support themselves at the same time. Then they are steered into a program not for their own good, but to keep that 40:1 rolling in. If someone makes one $5.00 the loan servicer/lender gets $200!
If you are having trouble paying back your loans, whether you are in default, rehabilitation, consolidation, or a payment plan, you need help before you get in any deeper. These lenders, servicers, and collections agencies have lawyers on their side, and unless the loan you’re paying off is for law school, you need one, too. Actually, you do need an attorney even if you did graduate law school, and even if you passed the bar. Remember that saying where the lawyer who represents himself has an idiot for a client? It’s a saying for a reason.
So, call us at our Fort Lauderdale or West Palm Beach office, and we can set up a free consultation. Bring in your loan documents and other papers, and let’s get started with unstacking the deck. In addition to good financial advice, we can look at loan forgiveness programs, a better repayment plan, loan consolidation with a reputable company, bankruptcy, and lots of other remedies to get you a fair deal.
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