Stumbling Blocks in Reducing Balance on a Student Loan

October 16, 2013
New York Times 
student loan news

The Consumer Financial Protection Bureau (CFPB) notes in its second annual report on student loans that problems having payments properly applied to a loan balance is one of the most common complaints the agency receives.

One issue, according to Rohit Chopra, the bureau's student loan ombudsman, is that students who choose to make extra payments to help pay down their principal faster may find that the money is not allocated in the way they intended. Instead of the additional funds being applied to the principal balance, in some cases they are notified that they are in the "paid ahead" or "advanced payment" status. Complaints to the CFPB over private student loans underscore "a mismatch between borrower expectations and actual service delivered," says Chopra, pointing to the "stumbling blocks, snags and surprises" that borrowers face in terms of payment processing practices.

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