For the vast majority of American’s with student loan debt, their debts are a necessary evil. Students acquired loans, sometimes of significant amounts, to pay for an education that would lead to employment which should pay off the debt. For most, the monthly payments are burdens but become a routine, and eventually the debt is whittled away until it is fully paid off.
But what happens when people run into issues with their student loans? What options do debtors have when there are problems? For those who struggle to meet the burden of monthly payments, the federal government and many nonprofit organizations offer solutions to help relieve debt or renegotiate repayment plans.
However, for a small percentage of people holding student loans, there could be an even larger problem; what if there is a discrepancy with the loan itself or a dispute with the financial institution? Who do these people turn to for help? Welcome to the office of the Student Loan Ombudsman.
The Student Loan Ombudsman
The office of the Student Loan Ombudsman was created to act as a neutral party in student loan disputes and cases of discrepancies. When approached by a borrower, an ombudsman will review a borrower’s case in order to determine the facts, hopefully leading to a path forward. While the office does not automatically side with the borrower, it does offer a hand to people in the face of massive financial institutions.
The mandate of the ombudsman is to provide a neutral third party service to help smoothly resolve disputes. In some cases, if a true discrepancy is discovered, the ombudsman will offer assistance in resolving the issue. In other cases, they act more as a resource for information and guidance on debt repayment issues.
Because the ombudsman is meant to be the last resort to dispute resolution, the federal student aid website breaks down the specifics of exactly what the office can and cannot do. According to the federal website, the ombudsman office will assist borrowers by providing information on relevant topics including bankruptcy, consolidation services, repayment options, interest rates, and collection charges. They can also help with clarifying certain income tax offset options and what service quality is expected of banks. Only in some cases do they assist in resolving disputes on payments and balances.
The federal ombudsman’s mandate does not cover issues related to private student loans. It also doesn’t allow the office to directly manage loans, meaning the office cannot process payments, deferments, or other services that need to be directed at a financial institution. Importantly, the office is not a customer complaint line either, as it will not simply take complaints about financial services companies. An ombudsman only deals with complaints as they are lodged within a well-researched formal investigation. Finally, the ombudsman cannot make binding decisions nor act as a witness, any decisions it makes are made as guidance for resolution.
Because the ombudsman for student loans is the very last resort, the federal government encourages borrowers to seek out all other options first. Once all other roads have been exhausted, the ombudsman can be contacted directly through the StudentAid website.
What Ombudsman Office is Appropriate?
Because there are a number of student loan programs, both federal and private, there are subsequently different ombudsman offices. Each office has a specific mandate and a specific area of coverage.
The Department of Education Ombudsman Office
As described above in detail, the Federal Student Aid (FSA) Ombudsman Group is meant to offer third party, neutral advice to borrowers who believe there is a discrepancy or issue with their federal student loan. In some cases they can provide a decision on disputes, however, in most cases they act as a valuable resource of information on repayment options, student loan services, and quality of service. They can also help rectify credit score discrepancies stemming from student loans.
Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman
One of the functions of the CFPB is helping borrowers who are struggling with private student loan burdens. They provide information to consumers on repayment options, including assistance for those whose private loans have gone into default. The CFPB ombudsman office will also help those who are finding it difficult to source a private student loan. Unlike the federal office, they will also receive complaints from borrowers against the lenders.