Student Debt Sufferers Turn to Loan Lawyers for Guidance

A few years ago, a man in his late 20s, who prefers not to be named, felt he was drowning in his student debt. He took out federal loans as an undergraduate, and then borrowed more money to go to law school. He was a smart guy, and after he graduated, he landed a good job at a big law firm. But he was nearly $200,000 in the hole. He began a conventional repayment program that ran him roughly $1,500 a month. On paper, the process seemed easy enough, but he soon became mired in a Byzantine maze that would make Franz Kafka blush.

When the man began paying off his debt, he was directed to several servicing companies, which the Department of Education contracts to manage student loans. Periodically, without explanation, he would receive a notice in the mail saying one of his loans had been transferred to a new servicer. After a while, he couldn’t keep track of who was handling each loan. Complicating matters further, he couldn’t get any guidance on what were his best options. The payment program he was on didn’t come close to touching the principal amount he owed. It seemed he would never get his head above water.

“I felt helpless,” he recalls. “The people you speak to sound like they’re in a call center. It was like they were literally reading off a screen. It seemed they didn’t know anything they couldn’t easily pull up.”

The Department of Education relies on servicing companies to provide clarity and guidance—that’s why they get paid with American tax dollars. But borrowers rarely get the assistance they need. According to a recent survey of student debtors, 20 percent find the terms of their repayments confounding. It’s no wonder, then, that defaults are on the rise: In 2013, they reached the highest level in two decades for recent borrowers, bringing the grand total of those in default to 7 million, nearly 10 percent of the entire student loan population. As a result, there’s an emerging new field of legal expertise—call it student loan law—in which attorneys help borrowers navigate a labyrinthine system, get them on the right path and save them as much money as possible. Put another way: They’re effectively doing the job of the Department of Education.

Student Debt Sufferers Turn to Loan Lawyers for Guidance