In the U.S., approximately 44 million people owe student loan debt, owing roughly $1.5 trillion. With many companies and lenders out there, sometimes borrowers get confused by the bills that come in.
If you owe a federal student loan to the U.S. Department of Education, you probably wonder why you receive bills from another company seeking payment of the debt. The US Department of Education does not collect the payments, but instead contracts with third party companies, called servicers, to collect the payments. Sometimes the servicer of the debt can be transferred to another servicer, which can cause confusion.
When loan servicing changes, it is important to have a record of the payments made so that you can make sure that the new servicer has the correct payment history. If you receive notice of a change in servicing of your student loan, make sure you keep records of the payments made and the balance due to the former servicer and check that the new servicer’s records reflect your own. The confusion can lead to negative credit reporting if it is not accurate. The Department of Education has announced that it has recently contracted with five new servicers to increase customer service and collection accountability. Read the press release from US Department of Education here.
While student loans are generally excepted from a bankruptcy discharge, there are options that can help make the debt more manageable such as income-based repayment. Oftentimes reorganizing or addressing other unsecured debt in a bankruptcy can help free up cash flow to pay the student debt.
If you have overwhelming debt that includes student loans or are in default of your loans, give us a call to discuss options that may help.