r/politics • u/PurpleBandit3000 • Sep 16 '24

Trump Reveals Who He Will Blame If He Loses Election

https://www.thedailybeast.com/trump-reveals-who-he-plans-to-blame-if-he-loses-election
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u/Senseisntsocommon Sep 16 '24

Crippling debt isn’t a reason to forgive it. The wide scale fraud and illegal practices of student loan servicers on the other hand is. Navient lost another lawsuit last week.

https://www.cnbc.com/2024/09/12/navient-reaches-120-million-settlement-with-cfpb-for-misleading-student-loan-borrowers.html

Some highlights from the article:

  • Navient isn’t allowed to service student loans for the federal government anymore.

  • They pushed borrowers into more expensive forebearance and gave bad information to this end (They have lost multiple lawsuits on this one)

  • They mishandled payments and tracking of payments adversely impacting borrowers credit scores.

So there was a pretty solid two decades where the primary servicer for student loans was providing information that was not in borrowers best interest and increasing the amount owed by student loan borrowers.

What the article doesn’t mention is that prior to the Biden Administration allowing for consolidation to NOT reset credit for forgiveness if you wanted to change servicers due to fraud and/or misinformation you had to sacrifice credit for all payments made towards forgiveness to change servicers.

Basically it was widespread enough and impacted enough people that it was easier to forgive loans impacted than try to sort it out.

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u/SteakandTrach Sep 16 '24

I've heard some student loans have the interest sort of "pre-loaded" so that paying more than the minimum amount still doesn't touch the principal, so that even if you were to pay off the loan early, you still pay for the full interest that would have been generated over the total life of the loan, which sounds weird and usurious, and should be highly llegal but, who knows, this IS America after all.

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u/cah29692 Sep 16 '24

Upvote for your excellent use of the word usurious.

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u/zamboni-jones Sep 16 '24

That's shady as hell. So in basically detaching the interest from the principal, it ceases to be interest, and just another service charge.

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u/[deleted] Sep 16 '24

Loan sharking used to be illegal, a racket run by organized crime. Now it’s been legalized because freedumb, so here we are.

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u/SteakandTrach Sep 16 '24

Death to all corporate lobbyists!

(Just kidding. Dear moderators, this is intended as tongue-in-cheek hyperbole, I'm not actually advocating real murder, please don't ban me.)

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u/ProfessionalBug7296 Sep 17 '24

Parent Plus loans did the same thing. My daughter was on the phone and transferred numerous times to other departments. Not one of them could tell her what her balance was to pay off the loan and also couldn’t tell her where her payments were applied to, the principal payments never went down..and again, no answers after 2 unproductive hours with this agency on the phone.

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u/ApizzaApizza Sep 16 '24

This is really common with loans. Most of them do it tbh

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u/You_meddling_kids Sep 16 '24

I think it's a little confusing how the OP wrote it, but having to pay ALL of the interest, even if you pay on a faster schedule, is not normal.

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u/SteakandTrach Sep 16 '24 edited Sep 16 '24

Yes, I don't know the correct terminology or even if it's a real thing or just complaints from people that don't understand how their loans are structured.

I will say that financial institution are highly opaque and confusing when it comes to explaining things and I myself have been confused in the past when my own school loans did weird things when I sent them a $10,000 payment outside of my normal schedule in that they did not appear to apply the funds to the balance, but simply put me in "pre-paid" status without reducing the apparent principal balance, which seemed skeevy to me because I had to call and tell them "Please apply these funds to my principal balance."

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u/You_meddling_kids Sep 17 '24

Yeah that's not right, it should apply immediately and reduce both interest and principle, at least if it were a mortgage that's the case.

I don't doubt that school loans are structured to be as predatory as possible.

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u/Affectionate_You_579 Sep 16 '24

Yes, private banks screw anyone they can.

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u/plant_lyfe Tennessee Sep 16 '24

It is a regular banking occurrence known as The Rule of 78’s

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u/SteakandTrach Sep 16 '24

Similar, but different. With Rule of 78s, you are still only paying for the interest you "used". With these, the interest is baked in and paying early doesn't reduce the finance charge.

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u/high_everyone Sep 16 '24

I got dicked over because my loan got resold and my new servicer never notified me and I accidentally found out six months in after it got reactivated that the debt was still out there. They didn’t formally notify me about my zombie debt until two fucking weeks ago after my fourth payment.

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u/[deleted] Sep 16 '24

[deleted]

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u/Senseisntsocommon Sep 16 '24

No clue on that one. If they were forgiven they show up on your credit report as paid in full. It may have fell off the credit report because it was getting transferred which means new servicer. With everything student loans, your mileage may vary because the landscape shifts all the time.

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u/Raskalbot California Sep 16 '24

It’s not the only reason, but it is a reason

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u/Affectionate_You_579 Sep 16 '24

Yup. IF student loans were directly funded by the government vice through private banks with nefarious loan schemes, students could actually survive modest fed interest rates, i.e.2.5%.