Student Loan Borrowers Discover Significant Drop in Credit Rating Due to CARES Protections – WSB-TV Channel 2
ATLANTA – The federal government has suspended student loan payments for millions of Americans to help them weather this crisis.
Corn Channel 2 Action News has learned that some loan service providers have reported student loan borrowers to credit bureaus because of it.
It drastically drops some people’s credit scores, even if they haven’t done anything wrong.
Channel 2 investigative reporter Justin Gray discovered that this was not how the law was supposed to work.
The Trump administration told Gray that the loan departments were notified when they suspended loan payments to process it, regarding credit reports, as if the payments were still pending.
But Gray has learned that some companies haven’t done what they’re told, and student loan borrowers are the ones who suffer.
A woman, who identified herself only as Vickie, said she received an email alert from her credit monitoring department.
“I checked my credit scores and they were down over 50 points,” Vickie said. “I panicked.”
A spectacular fall that came out of nowhere.
Ashley Higgins said she noticed it this weekend. She has worked hard over the past two years to improve her credit rating.
She told Gray that she was ready to refinance her house.
“My heart sank. I didn’t know what to do because I hadn’t done anything wrong and I took that blow to my credit,” Higgins said.
If you look at Vickie and Higgins’ credit reports, you can see the problem is with their student loans.
Both women have the loans repaid automatically each month. They never missed a payment.
Federal CARES law has suspended these student loan payments to provide relief to borrowers during the coronavirus crisis.
“We were informed that the loans were being carried over to September, I think, and we were like, ‘This is great,'” said Vickie.
But then her loan officer reported the break to the credit bureaus and her grades dropped because of it.
“It’s a ridiculous problem,” said Clark Howard, Channel 2 Consumer Advisor.
Howard said it wasn’t what the law wanted.
“Now the managers of these loans are reporting offenders who have done nothing other than what the law allows,” Howard said.
Vickie and Higgins’ loan manager is the same – Great Lakes, one of the largest student loan managers in the country.
Betsy Mayotte, of the Institute of Student Loan Advisors, told Gray that loan departments had to update their computer programming within days due to the CARES Act and Great Lakes may not be the only one company to have this problem.
“They all have credit report deadlines and some of them haven’t been able to complete all of that programming before the deadline,” Mayotte said.
Gray contacted the US Department of Education. They told him that borrowers’ credit scores were never supposed to be affected by suspended payments.
In fact, they ordered loan managers to report to credit bureaus just like regular payments were made.
Whitney Barkley-Denney of the Center for Responsible Lending said the federal government can and should force loan officers to follow the rules.
“They have multi-million dollar contracts with these repairers and, by the way, it’s taxpayers’ money that pays these repairers to properly manage student loans and so the Department of Education absolutely has a role. to play in the performance of their contracts, ”said Barkley-Denney.
When Vickie called Great Lakes to complain, they told her they would correct the credit score error, but sometimes that’s easier said than done.
“Getting a mistake to your credit corrected can be a long process and I just don’t have the brains to do it right now,” Vickie said.
Howard said you may have to take action on your own.
“Dispute these defaults with Equifax, TransUnion and Experian. It’s a pretty straightforward process and it starts an investigation of what information is there incorrectly, ”Howard said.
This brought Higgins’ credit rating from excellent to fair, and she is now concerned about the impact it will have on her job refinancing her mortgage.
“Overnight, all this work is not my fault. It’s just out of my control and extreme anxiety, ”Higgins said.
Gray has made several attempts to contact Great Lakes over the past two days. They told him late Tuesday afternoon that as an education ministry contractor, they couldn’t comment on the issue at all.
Late Tuesday evening, a representative from the Department of Education told Gray that preliminary research had shown that the problems were caused by a coding problem and that the department was working to fix it and fix the credit score of the students. borrowers by the end of the month.
Channel 2 Action News learned that this is not the only issue that has been raised with the CARES Act.
The bill also suspended the garnishment of the wages of people behind on student loans, but in court records on Monday, the Education Department admitted it is still garnishing the wages of over 50,000. borrowers, almost two months after his termination.
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