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Student Loans

How to Fix Student-Loan Errors

A phone call could help track down payments that have gone astray.

Balaji Rajan says the federal student loan program is too complex. Photo by James Foster

Balaji Rajan is chief executive of Ceannate Corp., parent company of iontuition, an online tool to help borrowers manage student loans. Read this excerpt from our interview:

See Also: The Right Way to Borrow for College

KIPLINGER: Borrowers have complained that student loan servicers take too long to process payments and fail to correct errors, says the Consumer Financial Protection Bureau. What can borrowers do if they have problems?

RAJAN: We have heard from borrowers about lost paperwork and payments. They should first go to the National Student Loan Data System to find their servicer, then make a call or go to the servicer’s Web site. The financial aid office of a borrower’s school can help.

Why do these problems occur?


When 20 million student loans are being serviced, there will be problems. The current federal loan program has become too complex. Borrowers have multiple repayment options based on different disbursement dates or different interest rates. There are different sets of documents. Students may have both private and federal loans. Sometimes borrowers don’t want to deal with it all.

What are the potential consequences? If a payment isn’t posted, can it hurt your credit?

Servicers will not update a credit bureau report until a loan is 60 days delinquent, so missing one payment won’t harm a borrower. But multiple unposted payments can result in a negative mark on a credit report. If a loan goes into default, it can affect a borrower’s ability to buy a home, as well as result in higher interest rates for auto loans and other types of credit. Borrowers can always place a dispute comment on their credit report if they believe the servicer has made an error. If borrowers go into default because of servicing issues, they should contact the servicer to dispute the default. They can contact their school to get help, or, with federal loans, contact the Education Department’s ombudsman. If borrowers provide servicers with the right documents, such as their payment history, or timely requests for deferment, the problem will generally be resolved within two weeks.

What can students do to prevent problems in the first place?


Borrowers can help servicers by regularly updating their contact information, so servicers are able to reach them before delinquency occurs. Many students tell us that servicers don’t have current e-mail or phone numbers. Free Web sites such as iontuition can organize all of your loans in one place and notify you when you need to take action. Stay away from companies that charge for this service.