Time for a rant.
I must say, the U.S. Dept. of Ed (“ED”) has got to be the most dysfunctional agency in the history of everything. No, I am not exaggerating. The absolutely ridiculous mistakes that this agency makes constantly- constantly!- just baffles and frustrates me. It’s one thing when an organization or entity cannot tell its left hand from its right. ED doesn’t know that it even has hands, let alone a left one and a right one. Now that ED has contracted private federal loan servicers to manage the day-to-day operations of most federal loans, things have only gotten worse.
I haven’t been able to find a comprehensive list of all the ways ED screws up people’s student loans. So I thought I’d create one. I can’t make this stuff up.
- If you are on IBR, ED will probably kick you off. I’ve blogged extensively (click here and here) about this relatively new problem. If you’re on Income-Based Repayment, ED and its private contracted loan servicers will make you re-apply for it every year. They will often not even tell you about this, or if they do, they won’t give you enough time to submit the appropriate documentation. Then you’ll see your monthly payment skyrocket, seemingly out of nowhere.
- ED will mess up your grace periods. This is particularly true for Grad PLUS loans, which are supposed to have a six-month post-graduation deferment period. Flip a coin, that’s about what your chances are of actually getting that deferment without a fight.
- When you consolidate, ED will probably lose your promissory note. I just cannot wrap my head around this one. I help many borrowers consolidate their federal student loans; it’s a great way to manage federal loans when you have many of them, and it can also get you out of default in certain circumstances. Last month, ED lost every singe promissory note that my clients mailed in; they then blamed the borrower for not mailing in the promissory note in the first place. I don’t get it; ED always receives the other required documents, but never the promissory note. I want to know: who is the genius at ED that is throwing away all the promissory notes that come in? No really, I want to know.
- During your consolidation, ED will leave out some of your loans. Another problem that I just don’t understand. Increasingly, ED is simply neglecting to include all requested loans in a consolidation loan. The Consolidation Dept. almost never has an explanation. Are people just stopping two-thirds of the way down the “list of loans to be included in the consolidation”? Luckily, you have 180 days to re-include loans into a new consolidation loan, but it just makes the consolidation process that much more tedious for federal borrowers (and me!).
- After consolidation, ED will put you on the wrong repayment plan. This is also almost universal, and I actually do know the reason for this. When you consolidate, you send in your repayment plan forms and associated documentation to the Consolidation Dept., which is based in Kentucky. When your loans are consolidated, they are sent off to any one of ED’s private contracted loan servicers based in various states. These loan servicers do not receive the repayment plan forms from the Consolidation Dept., so they then place you on the wrong plan. You then have to re-send your forms, and sometimes wait months to be placed onto the correct plan. Classic example of left hand not talking to the right.
- ED and its loan servicers may mis-report your current loan status. This is just cruel. I have seen borrowers who are still in school suddenly have their loans enter repayment– and they get a bill! On the flip side, I have seen borrowers who graduated six months ago still have their loans showing up as “in school,” which can prevent them from consolidating or getting onto the repayment plan of their choice. Getting your school, your loan servicer, the federal loan database agency, and the ED’s Consolidation Department all on the same page is kind of like trying to get Rush Limbaugh, Barack Obama, Michael Moore, and Yanni to have a sewing party together.
- Long processing times mean you’ll be forced to use up forbearance. Whether it’s waiting for ED or one of its servicers to get you onto the right repayment plan, or whether you’re trying to stay on IBR after being warned that you’ll get kicked off, ED and its loan servicers take forever to get something done- I’m talking months. That means that during the interim, you’ll be forced to use forbearance if you can’t afford your monthly payment. That would be fine, except interest is being capitalized during the forbearance period, which means you pay the price for ED’s incompetence.
I could go on, but you’ve probably had enough, and I’m exhausted. Maybe this is why there’s no other comprehensive list of ED screw-ups. I’ll do a “Part II” when I regain my composure.