There is something very satisfying about the pursuit of justice.
When someone — or some company — takes advantage of you, there are feelings of regret, shame, and anger. One of the most productive ways of dealing with that pain is to take action to help others avoid the same fate.
All too often, student loan borrowers feel like they have been deceived. Lenders, loan servicers, and even some colleges make promises that they refuse to keep.
The good news for borrowers who have fallen victim to predatory lenders is that there are steps that can be taken to make a meaningful difference. Even if the borrower cannot help their own situation, they can help others avoid the same traps.
Today we will cover options ranging from taking the case before a judge to the little things borrowers can do that make a big difference.
Going Nuclear: Hiring an Attorney for a Lawsuit
In many cases, the most aggressive step that a borrower can take is filing a lawsuit against their lender.
Going to court to prove fraud or another violation of the law is a huge step. It is also a very difficult step.
Rather than testing out your Google law degree, it is probably best to reach out to a local attorney with the necessary experience. While there are some attorneys who focus solely on student loans, it may not be possible to find a student loan lawyer in your area. However, there are many attorneys with experience handling consumer advocacy or debt collections cases.
Another option would be to reach out to a consumer advocacy organization. Even if they can’t start a lawsuit on your behalf, they may be able to put you in touch with an attorney who can handle the job.
Finally, many law schools have student clinics that will handle cases for people who might not otherwise be able to afford an attorney. For example, Harvard Law School has Predatory Lending and Consumer Protection Clinic. These students may lack experience, but they usually offer high-caliber legal services under the direction of skilled and experienced attorneys.
Unfortunately, taking a lender to court may not be an option for everyone. However, that doesn’t mean there are no options.
Small Steps Make a Huge Difference
Over the years we have seen some pretty inspiring stories about borrowers coming together to put an end to harmful lending practices.
The best example might be the lenders who automatically put loans in default if the borrower or co-signer passed away. Families had to deal with the death of a loved one AND they got a huge bill from the student loan company.
From a legal standpoint, the lenders had consumers trapped. The auto-default was a term buried in the contract that the borrowers signed. Bankruptcy usually isn’t an option for student loans.
Rather than having a few families be absolutely devastated by this rule imposed by some lenders, something magical happened. People filed complaints with the Consumer Financial Protection Bureau. The Consumer Financial Protection Bureau issued warnings to borrowers. The media interviewed families who were facing terrible circumstances. Borrowers took to social media to share their disbelief and hold lenders accountable.
In the end, it made a huge difference. Many lenders stopped putting the automatic default terms in agreements. Others stopped enforcing the term on existing loans.
Filing a complaint with the Consumer Financial Protection Bureau (CFPB) is one of the best things that borrowers can do to keep lenders accountable. Lenders almost always have to respond to complaints filed by borrowers and most lenders seem to take these complaints pretty seriously. It is a great way to get your issues brought to new people. When the complaints add up, the CFPB may issue a consumer warning or even start a lawsuit. This was how the big Navient lawsuit got started.
Other options include posting lender reviews online and sharing feedback via social media. The words of one person can inspire others to act and when enough consumers speak up, the big companies have to listen.
Ending the Relationship
Some might argue that the options we have discussed so far might be long shots with little chance of success.
For borrowers that want to immediately stop dealing with a lender, the best option might actually be to just get rid of the loan as soon as possible. For some, that means refinancing the loan with a new lender, for others, it means aggressively paying off the loan.
On the surface, this looks like giving in to the lender and giving them exactly what they want. In reality, it deprives the lender of what they crave most: income from interest and fees.
Lenders don’t make money when the principal balance is repaid. They are just getting back the money that they originally loaned.
For lending to be profitable, lenders need to get their money back plus interest. As a result, the most profitable borrowers are the ones who just pay the minimum on their loans. These borrowers end up spending way more on interest over the life of the loan. They are also more likely to run into lender fees over the years.
The borrowers who quickly repay their loans are not as valuable.
With this in mind, finding a new lender to refinance the loan cuts off profits immediately for the old lender. Because of credit score and income requirements, this might not be an option for everyone, but with about a dozen different lenders providing student loan refinancing services, most borrowers can find a more tolerable new lender.
The one big downside to this route is that it makes fighting the lender in court much more difficult. If you think there is a major legal flaw in your loan and that the lender has no right to any money, be sure to talk to a lawyer first. Once the loan is paid off, litigation becomes even more difficult.
What not to do
While there are a number of things that can be done to fight back against the banks and lenders, there are some options that will not get you anywhere.
Don’t be a jerk on the phone. The customer service representative who works for your lender is not your enemy. This individual has the misfortune of working for a lousy company, for what is probably lousy pay and dealing with angry people all day long. They didn’t write the terms of the contract, and it isn’t their fault they were poorly trained and are poorly equipped to give you good, or even accurate, advice. You aren’t talking to the big banker who got rich off of your late fees and high interest, you are talking to someone who is working an incredibly difficult job trying to put food on the table. Don’t be a jerk.
Don’t take it out on your significant other. You have every right to be pissed. That doesn’t mean those around you should suffer the consequences. There have already been enough people negatively affected by student loans, don’t be responsible for adding others to the list.
Don’t assume your student loan problem will magically get better or go away. When you do nothing, things get worse. Each day that passes means more interest and more late fees. Put together a plan of attack and stick to it. Hiding your head in the sand only benefits your lender.
Fighting the Good Fight
Most borrowers are never going to get a genuine apology from their lender, nor will they be able to put them out of business.
However, borrowers are not powerless.
A few smart, calculated steps can hurt a predatory student loan company in the only place they care about, their bottom line.