Income-driven repayment plans for federal student loan borrowers may not be as great as they are billed. That’s according to the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman, which released a report showing consumers complain of servicing problems that make it hard to get lower student loan payments tied to their income.
According to the CFPB, the delays and rejections can often result in increased interest charges and lost eligibility for other federal benefits and protections. In an effort to help student loan borrowers, the CFPB launched a prototype “Fix It Form” that loan services can use to improve the amount of service they provide to borrowers.
“Student loan servicers continue to fall short when it comes to helping borrowers address $1.3 trillion in student debt,” said CFPB Director Richard Cordray in a press release announcing the results of the study and the tool. “It’s time servicers focus more effectively on processing applications for income-driven repayment plans properly.”
According to the CFPB Student Loan Ombudsman Seth Frotman, breakdowns in the student loan servicing process can result in thousands of dollars in hidden costs, which borrowers can ill afford to pay. “Too many student loan borrowers are struggling to take advantage of their right to pay based on how much money they make. Servicers who want to better serve their customers can take the immediate steps recommended in this report to clean up this broken process,” Frotman said in the release.
Student loan debt has become a huge problem in the country, with the U.S. collectively owing more than $1 trillion. Outsized student loan debt is preventing people from buying homes, getting married, starting a family and even saving for retirement. According to the CFPB, student loans make up the second-largest consumer debt in the country and have grown rapidly over the last 10 years, with roughly 43 million Americans owing money on at least one student loan.