Yet again, unfair tactics used by student loan servicers are under fire. This time, Illinois is leading the call for answers – and action. Collections and Credit Risk reports that the state is one of several with intent to put the pressure on Sallie Mae. Their ultimate goal? To reform the loan servicing giant and encourage regulations that would protect the student borrowers in repayment.
Huffington post ran a piece with a more in-depth look at Illinois’ motives and why the state is likely the first of many to raise concerns. The author of the article cites the magnitude of the problem, stating that “… officials are growing concerned that procedures employed by companies like Sallie Mae when collecting monthly student loan payments or pursuing bad debts resemble the shady practices used by mortgage companies during the height of the housing crisis.” Student loans as bad as the housing crisis? Scary, but the scope of the problem and the increasing instances of questionable activity do strike some eerie similarities.
What to expect
Already, the Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC) have made it clear that they intend to clear out questionable activity and enforce regulations to ensure that Sallie Mae and its competitors are being regulated. Some of the shady practices that are going under the microscope?
- How Sallie Mae allocates payments
- Late fees
- Confusing terms and conditions
This latest vow to investigate indicates student loan debt issue is a problem that won’t simply disappear. It impacts the country, the state, and the individual. As more and more graduates become embroiled in their repayment, the repercussions of high debt at a young age paired with low full-time employment is becoming more and more evident. Financial instability and economic pressure are the result, and the public has been vocal about a high level of dissatisfaction with the system.
Sallie Mae represents just one of the major loan servicers but as the largest private student loan lender, it holds a high level of power over student borrowers. Because Sallie Mae holds so much power, it’s important that we keep them accountable to the needs of borrowers. That’s one reason we’re sharing the news of the latest state investigations and why we hope to encourage interest and spread awareness.
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What this means for borrowers
Unfortunately, any changes for borrowers will come slowly. The investigation will have to be completed and then further action taken in order to change the rules. However, at the very least, borrowers can look for a brighter light at the end of the tunnel. With few options when it comes to student loan servicers outside of Federal Services, borrowers often feel at the whim of their loan servicers. But the move towards action in itself is encouraging. The investigations could very well lead to more transparency and relief for borrowers who feel manipulated or confused.
Continue the conversation
If you’re someone who feels they’ve been mistreated or intentionally misguided during the repayment process, speak up. You can report your case to the CFPB as a formal complaint and keep tabs on the progress of the state investigations in order to understand what further steps you can take as issues are uncovered. If you have encountered any problems with Sallie Mae that could represent a larger issue, don’t hesitate to submit a complaint.
Remember, the housing crisis represented a system that needed to be regulated. With vocalization and continued push for rules and oversight, student lending tactics can can be reshaped in a similar fashion – hopefully before more borrowers get hurt.
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