After facing such things as IEDs and car bombs while serving overseas, the last thing a U.S. servicemember needs upon returning home is a hassle with a student loan.
But according to a newly-released report from the Consumer Financial Protection Bureau (CFPB), that's exactly what a lot of them are facing. The report, "The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform," describes servicemember complaints regarding the difficulties they have accessing the protections granted to them under federal rules.
The hurdles they describe range from not being able to get the information they need, to being met with roadblocks when they do try to pursue their benefits.
"We are concerned that our men and women in uniform are not being given the opportunities they have earned under federal law," said CFPB Director Richard Cordray. "For all the service our military members give us, the least we can do is protect them from this kind of disservice."
Paying off loans
Many servicemembers have student loan debt, including both federal and private student loans. The average cumulative amount of student loan debt for active-duty servicemembers graduating from college in 2008 was about $26,000, according to the National Center for Education Statistics.
Student loan default can be particularly troubling for active-duty servicemembers because it can affect their security clearance and military career. Burdensome debt can also be distracting and difficult to deal with, especially if serving overseas.
Congress put in place laws and programs to grant additional protections to servicemembers with student loan debt. The Servicemembers Civil Relief Act (SCRA) gives an interest rate reduction to men and women in uniform who acquired student loan debt before they went on active duty.
The Income-Based Repayment program reduces monthly payments based on income and family size. And, among other choices, there are special loan deferral programs, principal reduction options on certain loans for service in hostile areas, and loan forgiveness on certain federal loans for public service.
The report, based largely on complaints filed with the CFPB, as well as input from military borrowers at dozens of town halls and forums across the country, looks at how servicemembers are handling both their federal and private student loans.
It considers servicemembers who entered the military with debt and those who acquired it while serving. The report found that from trying to get good information to trying to take advantage of the benefits, servicemembers said they run into trouble. Specifically, servicemembers say that they:
Receive incomplete or inaccurate information: A common theme the CFPB heard from servicemembers was that they relied on their loan servicers to properly inform them of their repayment options -- but that servicers were not providing clear and accurate information. According to servicemembers, this was particularly true for military deferment and forbearance. By relying on this information and choosing less favorable repayment plans, servicemembers may be setting themselves up for tens of thousands of dollars in excess debt over the life of the loan.
Have difficulty navigating the system of benefits: The patchwork of options for military student loan borrowers can be confusing. Some laws and rules apply only to federal loans. Some benefits have specific eligibility requirements or conditions attached. Some require loan consolidation which might exclude borrowers from other protections. And other options vary greatly depending on the private student loan lender. Servicemembers who have multiple loans from multiple lenders say that it can be particularly difficult figuring out which loans are eligible for benefits.
Face roadblocks when they try to get their benefits: Even if they navigate the maze of options, servicemembers report that they are often met with loan servicer roadblocks. For example, the CFPB has heard from military borrowers, including those in combat zones, who have been denied interest-rate protections because they failed to resubmit unnecessary paperwork. These kinds of servicing obstacles prevent servicemembers from taking advantage of the full range of protections they have earned through their service to this country.
The problems that servicemembers report are typically on top of the problems civilian borrowers report in loan servicing as outlined in the CFPB Student Loan Ombudsman's Annual Report issued this week. That report -- which focuses specifically on private student loans -- described complaints received from private student loan borrowers, including surprises, customer service runarounds, and dead-end loan terms.
The CFPB is teaming up with the Department of Defense to create better awareness of the rights and options for servicemember student loan borrowers. The partnership will be multi-pronged, including Judge Advocate Generals, Education Service Officers and working with personal financial counselors on military bases.
CFPB staff, for example, will be visiting the Judge Advocate General's Legal Center and School in Charlottesville, VA, to train legal assistance attorneys from all branches of the military about issues raised in the report, and to ensure they know about repayment options for servicemembers.
In an effort to educate military consumers and the advisers seeking to assist them, the CFPB has developed a guideÂ for servicemembers with student loans with information on the various student loan repayment options, as well as frequently asked questions commonly posed by military student loan borrowers at Ask CFPB.
Servicemembers can also use the CFPB's online Web tool, the Student Debt Repayment Assistant, to navigate their options.
More information about how the CFPB is helping servicemembers is available here.