What To Do If Your Student Loan Lender Messes Up Your Credit Report

Imagine this situation: You get a letter from Nelnet confirming that your student loans are paid in full. Then two years later, you attempt to go back to school and get a student loan, only to find out you're denied because the National Student Loan Database says you're default on said loan. Through multiple glitches, Nelnet sent your loan to collections instead of marking your loan as paid in full on your credit report.

Or image in this situation shared to me by student loan lawyer Adam Minsky: I had a client who tried to consolidate his loans through the Direct consolidation program though a servicer (Servicer 1). The loans were held by Servicer 2. In the middle of the consolidation process, Servicer 2 transferred the loans to Servicer 3. Servicer 1 sent the consolidation payment to Servicer 2; Servicer 2 didn't return the payment or forward it to Servicer 3. This resulted in a duplication of the loan balance - Servicer 1 demanded payments on the newly issued consolidation loan, while Servicer 3 demanded payments on the underlying loans that were yet to be repaid. The Federal loan servicers all blamed each other and refused to communicate or rectify the situation

Now, while both of these are more extreme errors, glitches do happen. You have to realize that they loan servicing companies employ tens of thousands of people, and process millions of payments and requests each year. Even working at 99.99% correct, errors will still happen to thousands of borrowers each year (sadly)...

What can you do if your student loan lender messes up your credit report or your loans? Here's the steps you can take.

1. Communicate With Your Lender

The first step you should take is simply call your student loan servicer. Honestly, so many people want to jump to lawsuits and think they will get their student loans paid off because of a simple paperwork error. The chances of that happening are extremely low, and they are non-existent of you don't even try to resolve the issue yourself.

As we mentioned above, these are large organizations, and they are doing lots of different things. Mistakes do happen. The best thing you can do is call your lender and try to get the error resolved. Yes, it will take some of your time to make the phone call and document your conversation, but it's the first step, and it will resolve a lot of issues.

Just remember, document date, time, who you spoke to, and the nature of the conversation. Even better if you can take a screenshot of your phone to prove you called, or record the call (as long as you tell them you're recording the call - they are anyway).

2. Send A Certified Letter

If talking to your lender over the phone or via email isn't getting you the results you need, it's time to take things up a notch. Now's the time to send a certified letter to your lender and ask for resolution to your complaint.

Depending on your situation, you may need to send multiple letters. For example, if your lender is incorrectly reporting information to the major credit bureaus, you'll want to send a lender to each bureau and your lender.

When sending a letter to the credit bureaus, ensure that you include a copy of your credit report that is incorrect. Here's a good sample letter to send to the credit bureaus.

If you're disputing something more serious, such as our examples above, you might need a debt validation letter. Here's a great sample of a debt validation letter that will require the company to prove they have the right to collect the debt.

It's important to note that if you're looking to get a debt validated, the lender or collector has 30 days to provide you with the information from the date they receive your letter. That's why it's essential you send the letters certified with proof of receipt.

3. File A Complaint

If you're still not getting anywhere, you can file a complaint about your student loans servicing company to try to get the ball rolling. I call this step #3, but you can honestly do it concurrently to step #2.

By filing a complaint, you'll not only get the bottom of the pyramid moving, but hopefully get the top of the pyramid moving as well.

The best place to file a complaint is the Consumer Finance Protection Bureau (CFPB). You can file a complaint online here: https://www.consumerfinance.gov/complaint/

Make sure you take the time to document everything with your situation to hopefully get your complaint expedited.

You can also file a complaint at the Department of Education here: https://www2.ed.gov/about/contacts/gen/index.html

Finally, it never hurts to contact your Congressman. The President and the Secretary of Education have proposed various reforms to how student loans are serviced. If you're having problems, making a complaint could put these potential reforms on their radar.

4. Talk To A Student Loan Lawyer

Finally, if you're still not getting the resolution you need, you might need to talk to a student loan lawyer and see if they can help. 

There are a few scenarios where you should jump right to this step:

• You're being sued by your lender
• The 30 days have elapsed and your lender has not provided proof of the debt and no resolution has taken place

Otherwise, if you're not making progress, make sure you've gone through steps #1-3 and documented everything before going to a lawyer. Strong documentation will make your case much stronger if you have one.

Final Thoughts

It can be tough to deal with your student loan lender. It can be even tougher when they are making mistakes.

Make sure that you still start at the top - jumping to a lawyer or paying for assistance when a simple phone call would work doesn't make sense. 

If you're not quite sure where to start or what to do, consider hiring a CFA or CFP to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.

Mistakes do happen - but make sure you follow up. Nobody cares more about your money and financial life than you.