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Special announcement for Corinthian students

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Along with the U.S. Department of Education, today we announced more than $480 million in forgiveness for borrowers who took out Corinthian College’s high-cost private student loans. ECMC Group, the new owner of a number of Corinthian schools, will not operate a private student loan program for seven years and agreed to a series of new consumer protections.

As part of today’s announcement, we’re also releasing a special bulletin for current and former students enrolled at Corinthian-owned schools with more information. We urge you to read it carefully so you fully understand your options and obligations on your student loans.

If you experience difficulty with your student loan you can submit a complaint online or by calling (855) 411-2372. You can also find more information about options for repaying your student loan on our website.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.

Seeking answers for struggling student loan borrowers

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Thousands of borrowers have told us their stories on how they manage tough times with their student loans. Some students ended up borrowing much more than they expected in order to complete their degree, often because a parent lost a job in the midst of the financial crisis. Others had a tough time finding a job after graduation, making student loan payments difficult to afford.

Many borrowers have found help through income-driven repayment plans, where your payment is capped as a portion of your income. In the past year, more than one million student loan borrowers signed up for income-driven repayment plans on their Federal Direct student loans – an increase of 64 percent.

Too many private student loan borrowers are trapped

The private student loan market boomed in the years leading up to the financial crisis, where many lenders aggressively marketed loans and quickly sold them to investors. While these practices have subsided, too many borrowers with these loans find themselves out of luck and out of options. Unlike federal loans, most borrowers with private student loans don’t have flexible repayment options when they run into trouble. They report receiving very little information or help when they get in trouble, that there are no affordable loan modification options available, and that the alternatives to default are temporary at best.

Last year, Director Richard Cordray and Education Secretary Arne Duncan, along with senior officials from across the government, brought together the nation’s largest student lenders and servicers. We urged them to develop more options to help borrowers avoid default and increase the likelihood of full repayment.

Will student lenders and servicers make a deal?

Today, we’re asking several players in the student loan industry to find out what progress they’ve made. We’re looking to find out what loan modification options lenders and servicers provide, how customers can learn about their repayment options, and how borrowers can get approved. This effort also complements the work of the CFPB and our other regulators to help prevent repayment problems for future borrowers.

Borrowers across the country have told us that they aren’t looking to get off the hook, they just need a payment plan that they can afford. One borrower told us:

“I have no options left in regard to lowering my payment, forbearance, deferment or delaying my payments. I work full time as a teacher, but my student loan payment is more than a third of my income. My [specialty student loan company] just told me that there is nothing I can do but let my private loans go into default and to try to work something out with the collections agency. I have no qualms about paying a monthly fee that I can afford, but currently the money just does not exist.”

But many consumers have asked why their private student lenders won’t make a deal. After all, if lenders and servicers offered lower payments during a tough time, borrowers could avoid default and lenders could get fully repaid over the long run – a “win-win” for all.

In addition, several industry players have shared with us that they are willing to make deals with borrowers and will be launching new programs. But even today, many borrowers still have questions about these new repayment plans: What are the options? How do I enroll? Will other lenders offer similar repayment options?

The inquiry we are launching today can help us get to the bottom of these questions. Here’s an example of the information request that we’re issuing.

If you need student loan help today

If you’re in trouble today, check out our advice for borrowers. You can find a sample letter you can send to your student loan servicer to help get clear options – if they exist – on how to avoid default.

To learn more about other options when repaying private and federal student loans, check out Repay Student Debt. If you still need help resolving a student loan issue, like a surprise default or a payment processing mistake, submit a complaint.

When we hear back from the student loan industry on their efforts, we’ll be sure to update you.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.

A New Year’s resolution to conquer your student debt

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Each year, nearly 5 million college students leave school with student debt. For most of them who graduated this past spring, their six-month “grace period” just ended and those first bills have just have arrived.

For all of you faced with student loan payments and crafting New Year’s resolutions to conquer your debt, we’ve put together some tips to help you navigate through the noise.

Whether you’re just starting out or if you’re worried you’re in too deep, taking action today can help you save money, build your credit, and get you on the road to being debt-free.

For everyone

1. Know what you owe

Before you start, it will be helpful to have a list of your loans and the required monthly payment amounts. It’s very important to know the name of your servicer (the company that sends your student loan bill each month). This might be a different company from the original lender.

Check the national student loan data system
If you aren’t sure what kind of loans you have, visit the National Student Loan Data System (NSLDS) for Students and select “Financial Aid Review” for a list of all federal loans made to you. Click each individual loan to see who the servicer is for that loan (this is the company that collects payments from you).

Request a free credit report
Unlike federal student loans, there is not a single website that contains information about all of your private student loans. If you are unsure whether you have a private student loan, request a free credit report at annualcreditreport.com. Private student lenders may share information about your loans with credit reporting agencies even while you’re still in school or in deferment. You’ll need to contact each of your private student loan servicers to determine your total loan balance.

2. Automate and save

Consider contacting your loan servicer to set up auto-debit. Your servicer will automatically withdraw money from your bank account so you’re less likely to miss a payment. Many lenders offer an interest rate reduction for those who set up auto-debit, which could save you hundreds or thousands of dollars over the life of the loan. If you choose to sign up for auto-debit, make sure you have enough money in your bank account to cover your loan payment; otherwise you might get hit with overdraft fees or other penalties. You can cancel your auto-debit by contacting your servicer.

If you’re worried you’re in too deep

3. Enroll in an income-driven payment plan

There are a number of income-driven payment plans that can lower your monthly payment for your federal student loans.

Pay as you earn
If you graduated this year or later, Pay As You Earn (PAYE) is a newer repayment plan that is likely available for your federal student loans. The plan caps your monthly federal student loan payment at 10 percent of your discretionary income. To determine whether you qualify for PAYE, check out the Pay As You Earn calculator created by the U.S. Department of Education. Learn more at Ask CFPB.

Income-based repayment
If you have older loans, you should look into Income-Based Repayment (IBR). You can get a lower payment with IBR if your federal student loan debt is high relative to your income and family size. While your loan servicer will perform the calculation to determine your eligibility, you can use the U.S. Department of Education’s IBR calculator to estimate whether you would likely benefit from the IBR plan.

Many borrowers with federal Direct Loans can now enroll in IBR and PAYE online. Learn more at Ask CFPB.

4. Request repayment options for your private student loans

Although some companies are willing to help borrowers during a time of financial distress, unfortunately, not all private student loan companies offer assistance when consumers are struggling to repay their loans. We’ve created a sample letter that you can use to ask your lender or servicer to respond with accurate information about alternative repayment plans and loan modification options – potentially giving you valuable information on how to reduce your monthly payment or to temporarily postpone making payments.

We also published a sample financial worksheet for you to assess the amount of money you can put towards your loans. Some student loan companies request recent pay stubs or a bank statement to verify income and expenses, which you should consider attaching to your letter or e-mail.

Other things to think about

5. Sign up for loan forgiveness

We estimate that more than 25 percent of the U.S. labor force works in public service. This includes teachers, librarians, firefighters, military personnel, law enforcement, first responders, nurses, and social workers. There are a number of special loan repayment and forgiveness programs to assist student loan borrowers working in public service. Check our guides for servicemembers, teachers, and other public servants.

We also created a toolkit for public service employers with everything they need to help their employees tackle their student debt. The best way to get your employer on board is to ask! Get started.

6. Protect yourself from co-signer surprises

We published a report this year that describes complaints we received from borrowers who were placed in default, even though their loans were in good standing which can happen if a co-signer (typically a parent or a grandparent) died or filed for bankruptcy.

Many lenders advertise that a co-signer may be released from a private student loan after a certain number of consecutive, timely payments and a credit check to determine if you are eligible to repay the loan on your own. If your lender offers co-signer release, you may want to ask about this benefit and remove your co-signer as soon as you are eligible. To help you get started, we’ve put together a sample letter that you can send to your student loan servicer.

7. Try to refi

If you have graduated, obtained a job, and have excellent credit, you may be able to qualify to refinance your existing private student loans with a new private loan at a lower rate. Unfortunately for many in this situation, there are only a small handful of financial institutions that offer this financial product. Learn more at Ask CFPB.

8. Avoid unnecessary interest if you’re paying extra

Since many borrowers can’t refinance, one of the only ways to avoid paying unnecessary interest is to pay your high-rate loans off more quickly. You can send this sample letter to your servicer to ask them to direct any extra payments toward your highest-rate loan, which may save you hundreds of dollars or more in extra interest payments.

9. Submit a complaint if you’re having trouble

If you’re facing inconsistent information, poor customer service, or any other issue with your student loan servicer or a debt collector, you can submit a complaint to us. We’ll forward your complaint to the company and work to get a response from them. Visit consumerfinance.gov/complaint or call us at (855) 411-2372.

If you’re just getting started and want to learn more about your repayment options, you can also try out our Repay Student Debt web tool.

Remember, missing payments on your federal or private student loans can hurt your credit rating and your financial future. Missing a single payment on a student loan can result in late fees, additional interest charges, and can increase the cost of repayment. Taking action today could save you hundreds or thousands of dollars over the life of your loan.

Make this new year one where you take control of your student loans and get on the path to be debt-free.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.

Consumer Advisory: Student loan debt relief companies may cost you thousands of dollars and drive you further into debt

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Today we took action to put an end to two student loan debt relief scams that illegally tricked borrowers into paying upfront fees for federal loan benefits. In a joint filing with Florida’s Attorney General, we shut down student loan debt relief company College Education Services and, separately, we filed a lawsuit against Student Loan Processing.US for running illegal debt relief services. We allege that both companies exploited vulnerable student loan borrowers, made false promises about their debt relief services, and charged illegal upfront fees.

We are warning all student loan borrowers who have trouble managing their student debt to watch out for scams run by companies promising “student debt relief.” These companies prey on distressed borrowers who run into trouble and struggle to figure out what comes next. In some cases, borrowers do not think their student loan servicers can help them and seek help from a third party. Others are lured in by aggressive marketing practices that target the most vulnerable student loan borrowers.

In many cases, these companies promise thousands of dollars in savings on your student debt by falsely claiming special expertise or a relationship with the Department of Education, only to enroll you in a payment plan that’s available for free for all borrowers with federal student loans — all at a cost of hundreds of dollars or more. In other cases, these companies fail to deliver on their promises, leaving you with more debt and less time to avoid financial distress or default.

Last year, we warned you that you don’t have to pay someone to help with your student loan. You should also be aware of these warning signs to help you avoid student loan debt relief scams and information on getting help if you are a victim of this scam.

Warning signs that a student loan debt relief company may be trying to rip you off:

Pressure to pay high up-front fees. It can be a sign of a scam when a debt relief company requires you to pay a fee up-front or tries to make you sign a contract on the spot. These companies may even make you give your credit card number online or over the phone before they explain how they’ll help you. Avoid companies that require payment before they actually do anything, especially if they try to get your credit card number or bank account information. Not only is free assistance available through your student loan servicer, many times taking payment for debt relief services before providing help is illegal.

Promises of immediate loan forgiveness or debt cancellation. Debt relief companies do not have the ability to negotiate with your creditors for a “special deal” under these federal student loan programs. Payment levels under income driven payment plans are set by federal law and, for most borrowers, loan forgiveness is only available through programs that require many years of qualifying payments.

Demands that you sign a “third party authorization.” You should be wary if a company asks you to sign a “third party authorization” or a “power of attorney.” These are written agreements giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due.

Requests for your Federal Student Aid PIN. Be cautious about companies that ask for your Federal Student Aid PIN. Your PIN — the unique ID issued by the U.S. Department of Education to allow access to information about your federal student loans — is the equivalent of your signature on any documents related to your student loan. If you give that number away, you are giving a company the power to perform actions on your student loan on your behalf. Honest companies will work with you to come up with a plan and will never use your PIN to access your student loan information.

How to get help

Submit a complaint online or call us at (855) 411-2372 if you have been the victim of a student loan debt relief scam or if you are getting runaround from your student loan servicer. You should also instruct your student loan servicer that they should only provide information about your student loan directly to you.

If you have questions about repaying student loans, check out Repay Student Debt to find out how you can tackle your debt – even if you’re in default. You can learn about your options, and what you might want to specifically ask for when speaking with the company attempting to collect from you. Another great resource to visit is Ask CFPB for answers on many more of your student loan questions.

Even if you’ve fallen behind, you may have options

There are federal student loan repayment programs that can help remove the default status from your credit report. Be sure to learn about what’s available through our tools before paying hefty fees for something that likely won’t live up to your expectations or that you can get for free.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.

Veterans: Take advantage of student loan forgiveness, but don’t let it damage your credit

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For some veterans, their time in uniform caused a severe service-connected disability. This dramatically impacts their life after transition out of the military.

For 100-percent service-disabled veterans who have student debt, the Department of Education offers a valuable benefit to help them avoid financial distress – the chance to have their loans discharged (forgiven). Under federal law, veterans can seek federal student loan forgiveness if they receive a 100 percent disability rating by the Department of Veterans Affairs (VA). Private student lenders are not required to offer this benefit, but some do on a case-by-case basis, so be sure to ask.

We encourage all consumers to check their credit report regularly, but we want to especially encourage veterans who use this benefit to be sure that their student loan servicer (the company that collects payments) is providing correct information about their loan discharge to credit bureaus (the companies that compile and sell credit reports).

We continue to hear from veterans and servicemembers about the unique servicing obstacles they face as they seek to pay off student loan debt. We are concerned that, in some circumstances, when veterans are able to discharge their student loans due to their disability, they may experience damage to their credit report if their student loan servicer provides incorrect information to the credit bureaus. These mistakes, if uncorrected, can result in a negative entry on their credit report that makes it harder and more expensive for these disabled veterans to get credit, buy a car or take out a mortgage.

For example, one service-disabled veteran submitted a complaint to us describing how his credit score fell by 150 points as a result of this type of error. His score went from a nearly perfect “super prime” credit score to a much lower score simply because he received loan forgiveness.

I can’t get anyone to listen to me! I am a 100 percent disabled Veteran who has had his credit score ruined by a broken credit scoring system. I had my student loans…discharged…in August 2013…I went from 800 to 650 in less than 2 months. I am fighting to survive because a company from my own country is killing me.

Consumers are harmed when companies furnish inaccurate information to credit reporting agencies. An error in a credit report could make a big difference in whether someone receives a loan, qualifies for a low interest rate, or even gets offered a job. These credit-reporting problems, if uncorrected, can hurt veterans in this situation for decades.

For example, here’s what could happen if a veteran tried to buy a home after a credit reporting error caused similar damage to her credit profile and score and this damage went uncorrected. If she used a VA home loan to buy a $216,000 home, she could pay more than $45,000 in additional interest charges over the life of her mortgage (depending on the length and terms of the mortgage), since this error would cause her to qualify for a much more expensive loan.

Here are two important reminders for service-disabled veterans who have discharged their federal student loans:

    1. Check your credit report.

    If you received loan forgiveness due to your service-connected disability, your credit report should not state that you still owe the debt. Other borrowers who receive a disability discharge are monitored for three years by the Department of Education. But if you received a discharge based on VA documentation, you don’t have to worry about this step and your credit report should show that you no longer owe the loan, not that it was “assigned to government” for monitoring. And remember, you can check your credit report for free.

    If you have discharged older federal loans made by banks, pay even closer attention.

    Most federal loans taken out before 2010 – loans generally made by banks and other private entities but guaranteed by the federal government – require your lender to update the information on your credit report after your loan has been discharged. Even though no new loans are issued under this program, there are still millions of borrowers repaying this type of loan. Veterans who have discharged these loans should be sure to check their credit report regularly, since the rules regarding disability discharge changed in 2013.

    2. If something doesn’t seem right, contact the credit reporting company and dispute the error.

    Understanding how discharged loans show up on your credit report can be complicated. If you file a dispute and it still doesn’t get corrected, submit a complaint with us and we’ll work to get you a response from the company. You can call us at (855) 411-2372 or submit a complaint online.

Last year, we put companies on notice that they must investigate disputed information in a credit report, and that we will take appropriate action, as needed. We will also continue to closely monitor complaints from veterans and other disabled student loan borrowers to make sure student loan servicers are furnishing correct information to the credit bureaus about disability discharges. All financial services providers that serve veterans should redouble their efforts to ensure that veterans are not penalized for receiving the benefits they earned and deserve for their sacrifices.

Holly Petraeus is Assistant Director of the Office of Servicemember Affairs and Rohit Chopra is the CFPB’s Student Loan Ombudsman.

Struggling private student loan borrowers are still searching for help

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In the years leading up to the financial crisis, many of the same subprime lending practices that led to troubles in the mortgage market also existed in the private student loan market. Like the homeowners who turned to their mortgage servicer to modify their loans but ran into customer service dead ends, lost paperwork and other breakdowns, many private student loan borrowers are looking for a clear path to stay current and avoid default.

Today we’re releasing a new report summarizing complaints from private student loan borrowers about difficulties faced when working with a lender or servicer to avoid default.

While federal student loans have a number of loan modification options to help borrowers avoid default, private student loan servicers and lenders may not make it easy for borrowers to get help in times of distress, which may have consequences for not only your financial future, but also for the broader economy.

For example, our analysis of complaints reveals that many of you tried to find out more information by calling your lender or servicer, but received conflicting or inaccurate information as you were bounced between call center staff. Many of you told us how you were provided no option at all, driving you into default, even though a reduced payment plan might be in the best interest of both you and your lender.

Request for repayment options

After listening to you and to the student loan industry, we’ve developed some advice for borrowers who want accurate information on alternative repayment plans and loan modification options, including a set of instructions that you can consider sending to your private student loan servicer (the company that sends a bill each month).

You can download the sample letter and mail it to your lender or servicer, or you can use the text below to provide instructions using the “Send a Message” or “Contact Us” feature when you log into your account on the servicer’s website.

Although some companies are willing to help borrowers during a time of financial distress, unfortunately, not all private student loan companies offer assistance when consumers are struggling to repay their loans. Using this letter may help you get a clear answer and avoid long hold times and transfers from one call center representative to another.

I am writing to you because I need to reduce my monthly private student loan payment due to a financial hardship. I am requesting a payment that allows me to meet my other necessary living expenses.

Please conduct a review of my account to determine whether I am eligible for an alternative repayment plan.

[This paragraph is optional] I believe I can afford to pay $____ per month toward my loan(s). If you require details on my monthly income and expenses, I have attached a worksheet which you can use to make an evaluation.

If you require additional authorization in order to reduce the amount of my monthly payment, please consider this letter a written request that you contact my lender or other authorized party to conduct a review of my account and provide a response within 15 days of receipt of this letter.

If you do not grant this request for a reduced payment plan, I will be at risk of default. If I receive a reduced payment plan, I may be able to avoid default, which is in the best interest of all parties.

If you determine that you are unwilling to provide a reduced payment plan, please provide the following information:

  • What available reduced payment options do you offer other than forbearance?
  • For what reason(s) am I ineligible for these repayment programs?
  • If I am not eligible for these repayment programs, when will I become eligible?
  • What steps do I need to take to qualify for these repayment programs?
  • Do you anticipate modifying these repayment programs in the future?
  • Where on your website can I find additional information on these alternative repayment programs?

In addition, if you are unable to provide any of the information or documentation I have requested or otherwise cannot comply with this request, please provide an explanation.

I hope we will be able to agree upon an acceptable repayment plan.

Thank you for your cooperation.

These instructions may help you get valuable information on repayment options to reduce your monthly payment or to temporarily postpone making payments. You can also download a sample financial worksheet that you can use to determine the maximum amount of money you can put toward student loans.

Some student loan companies have told us that they may ask for recent pay stubs or a bank statement to verify income and expenses. Consider including these documents with your request, which you can mail or send through your private student loan servicer’s website after you login.

We also have other sample letters you can send to your student loan servicer to give payment instructions or request that your co-signer be released and others you can send to a student loan debt collector.

If you’re experiencing a problem with a student loan or debt collection, you can submit a complaint online or call us at (855) 411-2372.

If you have questions about repaying student loans, check out our Repay Student Debt tool to find out how you can tackle your student loan debt.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.