Consumer agency: Troops face ‘roadblocks’ repaying student loans

The Consumer Financial Protection Bureau (CFPB) unveiled a report Tuesday highlighting what it called the “breakdowns and roadblocks” faced by military service members repaying student loans.

The agency said it has received 1,300 complaints from service members seeking to pay back their loans. Among the challenges they faced were overpayments, negative credit ratings and the denial of other legal protections.

Those complaints follow a settlement in May 2014 between the Justice Department and a loan provider to pay out $60 million to nearly 78,000 service members who were overcharged.

“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,” CFPB Director Richard Cordray said in a statement.

In some cases they were wrongly denied military deferments on loan payments provided for under the Servicemember Civil Relief Act. The law ensures that interest rates on debs held by service members are capped at 6 percent during their military service and for a year after.

{mosads}”[This] is especially troubling, in the face of public commitments made by market participants to improve their delivery of service to military borrowers,” said Holly Petraeus, assistant director for service member affairs at the CFPB in a call with reporters.

The agency shared its first report on service members and student loans with the DOJ and the Federal Deposit Insurance Corp. in 2012.

That led to the $60 million settlement last year with Navient Corp., a company managing student loans, which was formerly part of Sallie Mae. Service members began receiving their compensation in June under that agreement.

The CFPB’s new report says service members still face confusing requirements when trying to manage their student loans.

Loan providers often do not fully explain why a service member is being denied benefits, such as deferment of payments, the report claims. Also, many rules are different for student loans versus other types of loans, adding to reports from military members.

“It’s not enough for servicers to simply say that they support their military customers,” Petraeus said.

“While the sentiment is nice, what the military customers need is not lip service, but correct information and adequate servicing of their loans so they receive the benefits to which they are entitled.”


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