With 41% of U.S. military personnel owing an average of around $27,000 for their college education, even the Pentagon is worried about the student loan crisis, which is why the Department of Defense and the Consumer Financial Protection Bureau (CFPB) have forged a new partnership to educate service members about their repayment options.
The partnership announcement follows the release of a new bureau report, which found that military personnel are often misled by their student loan providers about their options and forced to jump through a complicated series of hoops to qualify for repayment programs. The study, which was drawn mostly from complaints received by the CFPB, showed that service members often pay for college with a mixture of federal and private loans.
The varying rules and regulations relating to federal and private loans has left many military personnel—active-duty, reserve, and veterans—confused about which loans are eligible for which benefit. To address the mixture of federal and private loans, the new joint program will include advanced training on the regulations of student loans for personnel in each branch of the service’s Judge Advocate General, as well as the addition of personal finance counselors to base personnel.
According to the report, the new training and counselors are necessary because service members have relied on loan providers to properly inform them about repayment options, but loan providers supplied military personnel with incomplete or inaccurate information. The most common misrepresentations by loan providers had to do with eligibility for the military deferment and forbearance programs.
Service members have reported that, even if they are able to obtain accurate information, loan providers have created an obtuse, and disheartening, obstacle course to prevent them from taking advantage of the protection and repayment programs. The CFPB study provides examples of active-duty military personnel, some of whom were serving in combat zones, who have been denied interest-rate protections because they were unable to resubmit unnecessary paperwork by a loan provider’s deadline.
The latest report is similar to one that the CFPB released last week, which found that borrowers had filed 2,900 complaints with the bureau about their private student loan vendors. Of the complaints received, 65% referenced problems borrowers experienced with the servicing of their loan.
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