American servicemen and women dealing with student loan servicers continue to be denied the rights and protections guaranteed to them under the Servicemembers Credit Relief Act (SCRA) and other programs, a report by the the Consumer Financial Protection Bureau finds.
Congress enacted the SCRA and other measures to reduce the financial strain on military men and women but today's report finds -- just as an earlier report did -- that many loan servicers are refusing to grant servicemembers the rights they have earned through their service.
The report, “Overseas & Underserved: Student Loan Servicing and the Cost to Our Men and Women in Uniform,” highlights servicers’ continued mistakes handling servicemembers’ student loan repayments, resulting in improper denials of legal benefits, negative credit reporting, and shoddy follow-through on legal protections for military families.
Complaints also include frustrations from grieving parents seeking to discharge a co-signed loan following the death of their child.
“We continue to receive complaints from military student loan borrowers detailing a range of breakdowns and roadblocks,” said CFPB Director Richard Cordray. “Our deployed servicemembers should be able to focus on their military mission and spend precious free time talking with loved ones, not wrangling over problems with student loan servicers.”
Interest rate cap
The SCRA includes an interest rate cap for men and women in uniform who acquired student loan debt before they went on active duty. And, among other protections, there are special loan deferment programs, Department of Defense Student Loan Repayment Programs, and loan forgiveness on certain federal loans for public service. In addition, some private student lenders advertise that they offer loan discharge, military deferment, and other protections for military families.
But a 2012 report outlined the unique servicing obstacles reported by servicemembers.The report emphasized complaints from military borrowers, including those in combat zones, who were wrongly denied interest-rate protections they were entitled to under the law.
The CFPB has handled more than 1,300 complaints from military borrowers related to the servicing or collection of student loans since the publication of the last report.
Today’s report makes it clear that servicemembers continue to struggle to obtain the rights they have earned and it describes how general servicing issues become even more difficult as a result of the realities of military life.
Specifically, the report found:
Servicemembers continue to report difficulties in obtaining the SCRA interest rate cap of 6 percent, despite action by federal law enforcement officials last year against one servicer.
Many active-duty servicemembers’ loans are sent to collections due to servicer errors. The report documents how student loan servicers’ failures to adequately inform servicemembers and process completed requests can lead to surprise delinquencies, defaults, and debt collection efforts.
Disabled veterans and families of deceased servicemembers continue to encounter frustrations. There are protections available for some disabled veterans, whose service-related wounds are so severe that they qualify for a discharge of their remaining federal student loan debts.
Parents of deceased borrowers also report disgust and dismay with servicers of private student loans, after unsuccessful attempts to discharge debts they co-signed for their child.
The full report is available online.