Product: Student loan

In summer XXXX, I completed the Direct Consolidation Loan Application and Promissory Note and submitted it to the Department of Education. My loans were consolidated later that summer. 

Per the terms of the consolidated loan application and promissory note, I was assigned to the Income Contingent Repayment plan, and my loans entered repayment in XXXX XXXX. 

Unfortunately, I defaulted shortly thereafter. The consolidated loan remained in default for the next 15 years, accruing over {$60000.00} in interest during this time. 

In XXXX, I entered rehabilitation through XXXX XXXX XXXX, I successfully exited that program in XXXX XXXX, at which point my loan was picked up by XXXX for servicing. 

When XXXX picked up my loan, they never asked me what repayment plan I wished to utilize, instead making a unilateral decision to place me onto the Graduated Repayment Schedule. They did so despite the fact the most recent repayment plan I had affirmatively selected was the Income Contingent Plan. 

This was the first of several errors that XXXX would make that have had disastrous consequences for me. 

When I exited rehabilitation and entered repayment, the accrued interest on my account totaled around {$59000.00}. This interest was not capitalized when my account entered repayment, as the terms of my promissory note only permit capitalization under certain circumstances. This interest remained separate from the principle balance of around {$53000.00} for more than one year. 

In XXXX XXXX, I entered a brief forbearance. At the start of the forbearance period, XXXX sent me a notice informing me that they would send me a notice of " any interest accruing while my payments are postponed '', and advising me that if I did not pay that interest, it " may be capitalized at the end of the forbearance. '' I accepted this forbearance based not only upon this language, but also based on the language contained in my promissory note and loan agreement, which indicates that : " ED will charge interest on my Direct Consolidation Loan during a forbearance period. I must pay any interest charged during an authorized period of forbearance or capitalize the unpaid accrued interest by having it added to the loan principal at the end of the deferment or forbearance period. '' During the course of the forbearance, approximately {$1300.00} interest accrued. However, in XXXX XXXX, when I exited forbearance, XXXX capitalized {$59000.00} in interest, including all interest accrued during default. 

This was done in explicit contravention of the terms of my promissory note, as well as XXXX XXXX own disclosure notices, both of which specify that the scope of capitalization following a forbearance is properly set to the the interest accrued during the forbearance. 

This error had the effect of increasing my principal balance from {$53000.00} to {$110000.00}. Meanwhile, my monthly payments ballooned overnight from {$420.00} to {$760.00}. The new amount is not sufficient to cover interest accrued during the billing cycle, which means that my loan balance has only grown during the year and a half since this has occurred. My credit score has also dropped by over 50 points, making it impossible for me to secure a mortgage under favorable terms. 

To add insult to injury, if XXXX had placed me on the correct repayment plan when I exited rehabilitation, the damage from the capitalization error would have been contained, since ICR caps capitalized interest at 10 % of the outstanding principle. 

In other words, XXXX incorrectly calculated the interest that was subject to capitalization -- after having pulled the safety net intended to shield me from this outcome out from underneath me entirely. 

NOTE : I have attached supporting documentation to this complaint but please be aware that the Application and Promissory Note is blank, since XXXX can not locate my original documentation, including the consolidated loan sheet that lists the loans I elected to consolidate, as well as the completed and signed promissory note. The attached PDF is the application form that the Department of Education emailed to my in XXXX in response to my request for more information about consolidation. This was the form I completed, but XXXX can not or will not produce the executed version of same.