In May of last year, the U.S. Department of Justice and Federal Deposit Insurance Corporation entered an order that provided $60 million to compensate more than 77,000 military service members.
The action was against Sallie Mae and Navient — which formerly were one company — and followed numerous complaints about the educational loan benefits the service people should have received.
Now, 14 months later, the Consumer Financial Protection Bureau, or CFPB, published a report saying problems with educational loans persist.
The report, titled “Overseas & Underserved: Student Loan Servicing and the Cost to Our Men and Women in Uniform,” cites ongoing mistakes in the ways loan payments by service members are handled and the denial of legal benefits, negative credit reporting and sloppy legal remedies that often follow.
The law includes a ceiling on interest rates for military people who assumed student loan debts before going on active duty. Federal student loans include deferment and forgiveness provisions for military service. Some private student lenders say they offer loan discharge, military deferment and other ways to ease the burden on families in the military.
The CFPB wrote a report in October 2012 citing many of the same problems. Since that report was issued, the bureau said it received another 1,300 complaints.
The report cites four major problem areas:
— Military deferments are denied with inadequate explanation, applied haphazardly and sometimes approved verbally but never applied, resulting in late fees, defaults and debt collection.
— Service members still struggle unnecessarily for SCRA protections, and loan servicers still appear not to understand the law.
— Military families continue to have problems with the disability discharge, and negative credit reporting can follow. Families also are unsure whether that benefit applies to private student loans as well as to federal loans. The uncertainty extends to co-signers looking for the same protections following the disability or death of a primary borrower.
— On top of loss of protections specific to military borrowers, complaints also show that servicing breakdowns can affect their financial and military readiness.
Language in the CFPB report makes it clear lenders need to understand and apply military deferment, discharge because of disability and SCRA interest rate reductions.
“Servicers must make the requirements, application process and communications regarding these programs clear, concise and free of unnecessary roadblocks,” the report states. In its conclusion, it recognizes that “no comprehensive statutory or regulatory framework exists” to ensure uniform servicing of all student loans.
At the Finance Authority of Maine, or FAME, Governmental Affairs and Communications Manager William Norbert said Maine service members have not reported any problems. He advises ongoing communication with lenders, especially when service people leave for or return from active duty.
If problems do arise, FAME has an ombudsman, or problem-solver, who can help, online at famemaine.com or by calling the agency at 207-623-3263 or 1-800-228-3734.
The U.S. Department of Education also has an ombudsman who can help military and non-military borrowers with student loan issues. For information, visit the DOE site at https://studentaid.ed.gov/sa/ or call toll free at 1-877-557-2575.
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email email@example.com.