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5 Million Student Loan Borrowers Impacted by Federal Lender’s Negligence
May 23, 2020 Key 2 Debt Free Uncategorized
According to officials from the Department of Education, just under 5 million federal student loan borrowers who were placed into an emergency forbearance due to COVID-19, have recently been negatively affected by negligent credit reporting.
The Federal Student Loan Servicer, Great Lakes Educational Loan Services, erroneously submitted misinformation for approximately 4.8 million federal student loan borrowers to the three major credit bureaus: Equifax, Experian and Transunion — An oversight that caused damage to borrowers’ credit reports. The problem impacted federal student loan borrowers who were enrolled into the COVID-19 forbearance, a six month postponement on their monthly payments under the CARES Act, H.R. 748 (116).
In the CARES Act, Congress required the Department of Education to make sure that deferred payments were reported to credit bureaus as on-time payments. However, according to the vast majority of borrowers whose loans were serviced by Great Lakes, this was not the case.
Angela Morabito, a spokesperson for the Department of Education, said on Wednesday (May 20th) that they are working with the federal loan servicer and have been responding “aggressively” to fix the credit reporting problem caused by a “coding error”. The Department of Education and Great Lakes also wrote in a statement, “we do not believe our reporting has impacted actual consumer credit scores provided by those agencies.”
As convincing and sincere as that written statement sounds, I disagree with it. And so does Mike Pierce, a financial professional who worked on credit reporting issues at the Consumer Financial Protection Bureau during the Obama administration. Pierce stated that it’s hard to believe assurances that the errors on borrowers’ credit reports will not end up harming them. According to Pierce, who is now the policy director at the Student Borrower Protection Center, “Across the economy, America has decided that what’s on your credit report is a proxy for how responsible you are. There are no guarantees when millions are newly looking for work that their job prospects or their housing prospects aren’t going to be held back by the fact that, for millions, their credit reports say they’re less responsible.”
If we also take into consideration The Department of Education’s track record, the assurance that their reporting has not impacted actual consumer credit scores starts to unravel. In reality, this credit reporting mishap is only the latest challenge that the Education Department has created as they attempt to swiftly implement emergency student loan relief.
Just last month, Education Secretary Betsy Devos was sued by borrowers whose wages were still being garnished to cover payments on their defaulted Student Loans, despite the fact that the CARES Act demanded lenders and collection agencies temporarily halt garnishment and treasury offset. The Department of Education however did not take accountability for this “mistake” and instead shifted the blame on employers who are ignoring the proper instructions.
Any borrowers that believe their credit report has been negatively affected by incorrect reporting, please click here to schedule a complimentary consultation with one of our professional debt management & financial coaches.
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