Student-loan borrowers are being stripped of debt relief and cheaper monthly payments because of poor customer service, a federal watchdog says

• The CFPB analyzed more than 9,000 complaints received from student-loan borrowers in the past year.

• It found poor customer service from loan servicers had kept borrowers from the relief they deserved.

• The report highlighted inaccurate payments, refund delays, and long hold times.

After receiving thousands of complaints over the past year, a top federal watchdog concluded that student-loan companies were not helping borrowers as they should.

The Consumer Financial Protection Bureau released its Report of the CFPB Education Loan Ombudsman, which analyzed complaints that Robert Cameron, the agency's education-loan ombudsman, received from September 1, 2022, through August 31, 2023. In that time period, 9,284 consumers submitted student-loan complaints — 6,934 of which were related to federal loans and 2,350 of which were related to private loans.

Cameron found that when it came to federal loans, borrowers had encountered a host of difficulties as they prepared to enter repayment for the first time in more than three years.

"Consumers reported experiencing long hold times, delays in processing applications, and incorrect information regarding payment amounts and due dates," the report said. "Further, they reveal significant servicer errors including inaccurate payment histories and delayed refunds that are owed to borrowers."

It added that "these reported hold times, systems problems, and inaccuracies are meaningful impediments for borrowers trying to access benefits that they are entitled to under the law."

Over the summer, President Joe Biden rolled out a new income-driven repayment plan, known as the SAVE plan, intended to lower many borrowers' monthly payments. The Education Department also began implementing relief for borrowers who had completed the required 20 or 25 years of payments on IDR, along with those who had completed 10 years of payments on Public Service Loan Forgiveness.

But many borrowers have struggled to get that relief because of administrative errors such as lost payments and inaccurate billing, and tight resources at student-loan servicers have made it difficult for borrowers to get the help they need.

For example, one borrower complaint to the CFPB said: "I cannot get ahold of my loan servicer. I have tried a half dozen times. Either the phone line is disconnected, the chat service doesn't work, or the wait is 960 minutes. I cannot adjust my payments or do anything unless they talk with me."

Another borrower previously told Insider her payment on the SAVE plan ended up being more than $100 over the estimate she was given. An Education Department spokesperson recently told Insider that about 305,000 student-loan borrowers had received inaccurate payment information and that servicers shouldn't bill them until the errors were resolved.

Additionally, the CFPB found some borrowers had faced "unreasonably long delays" in getting refunds on payments they did not owe, creating "substantial financial consequences for borrowers who may rely on these funds to pay down other debt or afford other essential goods or services."

When looking at the breakdown of complaints received over the past year, the CFPB said the most frequent issue was borrowers receiving "bad information" from their servicer. The servicer Mohela was the top subject of federal-loan complaints, making up 36% of the share, and about nine in 10 complaints involved problems borrowers were encountering with their servicer.

The CFPB made recommendations for servicers, policymakers, and law enforcement to follow, including closely monitoring complaints to ensure servicers are following the law, making sure lenders are not collecting payments that borrowers do not owe, and developing specific procedures to address the complaints.

"While we regret any error, the Department is working closely with student loan servicers to ensure that they are providing borrowers the information they need and holding servicers accountable when they do not," an Education Department official previously told Insider in a written statement.

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