Consumer complaint received 2016-12-08
Product: Student loan — Federal student loan servicing
Issue: Dealing with my lender or servicer — Don't agree with fees charged
Company: AES/PHEAA (DC)

I submitted my annual recertification and recalculation of income for my Income Based Repayment plan with my loan servicer, FedLoanServicing, before the due date - and called on the due date to have them confirm its receipt. I later received a letter in my account inbox stating that they had received my application to remove my loans from the IBR plan and get on another plan - an incorrect reading of my application, which clearly stated an intent to renew my status in IBR. That letter explained that I had been put on forbearance with a payment amount of {$580.00} while the change was pending. 

When I called FedLoanServicing to inquire as to the reason for the change to my repayment plan and get additional information regarding new payment terms and any capitalization of interest that might occur as a result of the change, I was reassured that the change to the " pay as you earn '' plan, while administratively confusing, was in fact good because it would result in lower monthly payment amounts as well as a 20 year loan-forgiveness horizon vs. 25 years on IBR. The reason I was given for the change being made was that FedLoanServicing ( not me ) incorrectly populated a field while processing the application that should have been left blank, resulting in the request being processed incorrectly. So, while it was an admitted error on my servicer 's part that caused annual IBR recertification and recalculation of my monthly payment to be interpreted as a request to leave the program and join another payment plan, I was ensured that the mistake was serendipitous because the new program I was being moved to was more advantageous. 

When I asked if this change would result in the capitalization of outstanding interest, I was told that it would, but that I only had {$270.00} of outstanding interest, so the impact would be quite small. I tentatively agreed that this would be acceptable if that was the amount that would be capitalized as a result of my being changed out of IBR into a new payment program, but did n't trust that this was a correct statement. 

When I reviewed my account, I discovered that the low amount of accrued interest owed to the fact that it had already been capitalized when a forbearance was placed on the account following their incorrect processing. In other words, they incorrectly capitalized interest and I want that charge reversed immediately. 

My experience renewing my IBR plan last year was very similar : I was moved to a standard repayment plan and was advised that the change occurred because some internal mistake caused FedLoanServicing not to process my request, which had been timely and properly filed. I was offered, ad nauseum, to be placed on a temporary forbearance while my application processing was expedited, which of course would result in my accrued interest being capitalized ( though this fact was never volunteered ). I insisted over the course of several phone calls that they find a solution that did not require me to pay monthly payments beyond my means or have my accrued interest capitalized. They finally relented when I threatened to file a CFPB complaint and removed the capitalized interest charges. 

That also was not the first time this had happened ; some four years I naively agreed to a temporary forbearance necessitated by another processing error ( the paperwork was lost when the Dept of Education transferred it! ) and FedLoanServicing capitalized my accrued interest. There is now a clear pattern of FedLoanServicing : ( 1 ) committing some clerical error in processing my paperwork, and ( 2 ) prescribing some procedure that results in the capitalization of my accrued interest ( and a windfall of tens of thousands of dollars for FedLoan Servicing at my expense ). Their customer service reps always attempt to reassure, but never to inform. At this point I no longer believe these are good faith errors.