Student Loans Need Oversight

October 13, 2015


​Back in the day - when the predatory mortgage loans were being tossed out like candy, so were the student loans. It was easy to get a student loan and only took a few minutes. School employees quickly entered information into a computer, twirled the computer around and said ‘here-press enter’. Just like that you had a loan, there was no need to even sign anything. Problem was, nothing was explained and you had no idea about interest, rates or the pitfalls. The school said they’d send a copy later, you were enrolled, and didn’t have to pay anything until after you graduated. What a relief!


No wonder we have 41 million Americans owing more than $1.2 trillion in student loan debt.  The economy hasn’t recovered, foreclosures are still going on and now the student loan debt is the huge beast on the horizon.


The largest companies servicing these loans are Navient, Great Lakes and Discover Bank. The U.S. Education Department has contracts with 11 loan servicers. Unfortunately, there aren’t any federal standards governing their activity.


Thousands upon thousands of complaints have been filed with the Consumer Financial Protection Bureau (CFPB). The servicer is interested in one thing - getting the highest amount of money they can. The system is set up misaligning the financial incentives and discourages the servicers from working with the borrowers who fall behind.


The CFPB is talking about standardizing student loan servicing practices but that may take years - if at all.  The CFPB did bring a case against Discover Bank last year. Discover paid $18.5 million without admitting any wrongdoing. We have no idea if any of that money will ever be given back to help the borrowers.


Many of the complaints filed with the CFBP involve abusive collection tactics. The majority of comments were from borrowers who encountered problems or practices that discouraged utilization of alternative repayment plans. Borrowers who were in default subsequently had their interest charges increased putting them further behind.


Student loan debt is directly contributed to the spillover effects of the economy such as limiting access to credit, diminishing savings, reduction of home ownership that, in turn threatens retirement security. The economy has also inhibited borrowers from pursuing careers as healthcare providers and educators as a way to work off debt in government programs or as entrepreneurs.


When facing unemployment or other financial hardships, borrowers should contact the servicer to try to enroll in alternative repayment plans, including the income-driven repayment plans for borrowers with federal loans. Borrowers can request deferments, forbearances and a modification of loan terms. Borrowers can also try for a temporary or permanent reduction of interest rate, extension of repayment term and even a termination of obligation to repay (loan forgiveness, cancellation or discharge).


More than 22,000 complaints were filed from members of the public calling for strong standards to protect student loan borrowers. The mortgage industry has oversight, maybe it’s time for student loans to have something similar. If you have a problem with your servicer, contact the CFPB at


Gantenbein Law Firm is a student loan debt law firm. In most cases, student loan debt is not dischargable in bankruptcy. That does not mean those with student loan debt have no options: Gantenbein Law Firm has developed a successful method for resolution in student loan debt cases. If you are burdened with too much student loan debt, call Gantenbein Law Firm at 303-618-2122 to discuss your options.  


Gantenbein Law Firm's experienced attorneys also practice Business Law, Real Estate Law, Foreclosure Defense (including loan modifications), Estate Planning (Wills, Trusts & Probate) Credit Dispute and Tax Law (including IRS tax audits). For more information regarding Gantenbein Law Firm, its practice areas and its attorneys, visit Gantenbein Law Firm is located in Denver, Colorado at 1760 Gaylord Street. 

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