If your loan servicer makes a mistake calculating the proper payment for your income-driven repayment plan it can be extremely frustrating and scary. Today we will discuss what can cause this error and how to get fixed.
We will start by looking at a recent reader email from Jake who is facing an issue that many borrowers face:
I currently have $22,609.51 on Federal Subsidized Loan and $13,852.13 Unsubsidized Loan (total $35,858.44). I am a teacher and I currently make $40,050 in salary before taxes, medical insurance and other expenses. I recently applied for IBR thinking that my payments would be reduced knowing that I don’t have much money to work with at the end of the month. I also applied for the public service status. I am married and have a child close to being here and I am the only income in the household. I used to pay about $260 a month and now after the adjustment it is up to $446.19. Am I being tricked? It was hard enough to be paying the $260 before they decided to make it $446. What would you suggest my best option to pay it off is?
At first glance, it seems like this reader is being charged way too much on his student loans based upon his current salary. Let’s take a look at how we know and what can be done to fix it.
Determining if your lender made an IBR calculation mistake
The Department of Education has a very useful tool for calculating your expected monthly payment on the various student loan repayment plans. This tool, called the federal repayment estimator, collects your student loan information and your income information. Based upon all the relevant data, it can tell you exactly what your payments should be.
Going back to our reader email, if we use an AGI of $40,050 we get a monthly payment of $274 per month. We know that the $274 per month is actually a little high because your AGI (from your most recent tax return) will always be less than your total pre-tax income.
It is also worth noting that PAYE and REPAYE payments would only be $183, so Jake may want to investigate which income-driven plan is best for his particular circumstances.
What caused this error?
Based upon Jake’s total student loan balance, a $446 payment may be his monthly payment if he was enrolled in the standard 10-year repayment plan. The 10-year plan is the default student loan repayment plan. Because income-driven plans have to be certified every year, if the income information isn’t processed in time, Jake’s servicer may have reverted him back to the standard repayment plan.
If Jake supplied his income information before the deadline imposed by his lender, he will want to make sure that: 1) he doesn’t have to make any payments on the standard repayment plan and 2) his lender does not capitalize his loan balance. Capitalized interest can quickly inflate a student loan balance.
Getting a calculation error fixed
Regardless of the type of payment calculation error, the first step is normally a call to your student loan servicer.
When you call, be sure to ask the following questions:
- What is my current monthly payment?
- What repayment plan am i currently enrolled in?
- What income information was used to determine my monthly payment?
These are basic questions, but often they will get you to the right information. For example, Jake’s lender may say that he is enrolled in the standard repayment plan. If they tell him this information, he knows that they need to get him signed up for the income-driven plan he requested. The customer service representative should be able to help him figure out the status of his previous application and the steps that need to be taken.
Most of the time a calculation error isn’t really a calculation error at all… it is a simple enrollment issue.
Fixing a true math error
If your lender has all of the proper information, but just got the math wrong, solving the problem can be a little more difficult.
When you call your loan servicer to discuss an issue of this nature, the questions can quickly get complicated, so you may have to call a couple of times before you get a service representative who is knowledgable enough to help you. You may also have to call and ask to talk to a supervisor.
Circumstances like this is where the federal repayment estimator is especially useful. Using the numbers you generated from the repayment estimator ask your loan servicer why your payment isn’t the number you expect to see according to the website. The loan servicer may say that it is only an estimate, but for someone like Jake, with a payment of nearly $200 more than the estimate, there clearly is another issue.
Patiently talk through all of the information that you entered into the repayment estimator. Going through these steps with a helpful customer service representative can help identify errors on your end or the loan servicer’s end.
If you have made multiple unsuccessful attempts with your loan servicer to resolve the issue and you keep having problems, there is an additional resource that might help.
By filing a complaint with the Consumer Financial Protection Bureau, you force your loan servicer to take a look at the issue. This normally results in a higher ranking person at your loan servicer taking a look at your account to make sure there was not a mistake by the servicer. The majority of the time the CFPB will require the loan servicer to respond to your compliant. Because these complaints can have a big impact on servicer contracts, your student loan company should take any complaint very seriously.
Getting a larger than expected student loan bill can be scary. The good news is that their are ways to fix mistakes on student loan bills. You just have to be patient and work through the process.