IBR and Negative Reporting - Shorter Version

[A_Little_Help]

I pay my eleven (11) student loans under the IBR program. At the time, I had an income that qualified for $0 monthly repayment. Is it possible for a loan servicer to apply IBR information to some loans, but not all loans? Similarly, under the IBR program where payments qualify for $0, is it possible for a loan servicer to report some student loans as OK, but report others as past due.

Basically, I had 11 seperate student loans, 3 serviced by "Servicer 1" and 8 serviced by "Servicer 2."

I provided my IBR information to both servicers in April 2012 (I have the fax cover sheets and recently verified with Servicer 1 that they recieved and processed it).  When I provided the IBR informatoin, Servicer 2 specifically told me to hand-write a request for forbearance on the fax coversheet to make sure they have time to process the request, which I did. My IBR qualified me for $0 payment. I understand IBR information to be applicable for a year then you have to reapply.

In August 2012, Servicer 1 transfered the 3 loans it maintained to Servicer 2. From September 2012 to present, Servicer 2 maintained all 11 loans. In November 2012, Servicer 2 reported 60 days past due on my credit report for the 8 loans they originally maintained, while the 3 loans transfered were reported as OK by Servicer 2. The 8 loans went 120 days past due before I discovered the problem. The 3 transfered loans continued to be reported as OK.

In January, I requested and was granted forbearance until March 5, 2013 and got the loans current. When I questioned them as to what happened, I believe they said that in April I sent my IBR paperwork in too early even though when I spoke to them in April they instructed me to hand-write a request for forbearance on the fax coversheet before I submitted it and didn't mention anything about it being too early.

In February 2013, I recieved a letter stating that I need to reapply for the IBR program. That day, I faxed in my IBR paperwork (I have the confirmation sheet). All accounts remained OK until May 2013 when, again, the 8 loans were reported as 60 days past due while the 3 loans remained OK.

I don't understand why some of my loans under the IBR program can be OK while others are showing past due when my IBR qualified for $0 payment. Shouldn't it be the case that in April 2012 when I submitted my IBR information that it should apply for one year until April 2013?

Any insights would be greatly appreciated.

If you'd like the (long) full story see this link

[SCF]

It sounds like Servicer 2 did not process your request for the IBR payment plan correctly for the 8 loans they held.  Whether this was your fault or theirs is not really clear, and will probably come down to how much documentation you have.  If you've still got all the documentation, try to establish with Servicer 2 what exactly they think happened, and then use you documentation to make your case.  If they don't listen/work with you and you think you've got a strong case, this might be a good one for the Student Loan Ombudsman to mediate.  You can submit your information to them online.

Unfortunately, the fact that your loans with Servicer 1 were correctly placed into IBR, and then correctly transferred with their IBR status intact doesn't mean that all your loans would automatically be placed in the same status.  You have to apply with each servicer, and each servicer has to process and implement the request seperately if you have multiple servicers.  The standards are the same, but because each servicer is responsible for its own loan portfolio, they each have to get and process the paperwork.

[A_Little_Help]

Thank you for the reply, SCF. I really appreciate it!

My next question concerns Servicer 2 telling me that I submitted the IBR application "too early."

I do understand that it will probably come down to the documentation that I have. I spoke with Servicer 2 in April 2012 and they instructed me to hand-write on my IBR application fax cover sheet that I request forbearance to end when the IBR is applied to my account. They never mentioned to me that I was applying "too early." I have the fax confirmation sheets and have confirmed that they received my application and they currently still have it in my file. So, both servicers received the same IBR application, with the only difference being my following Servicer 2's instructions to hand-write my request that forbearance endi when IBR is applied.

When I called Servicer 2 this past Friday, 8/2/12, they first told me that I probably didn't select the options to have both my Direct and FFLEP loans applied to IBR. That is not true as the IBR request application form did in fact apply to all my loans (and Servicer 1 applied it to the all loans they were servicing). Then they told me that I applied "too early" and my IBR request was "rejected." I do not recall ever receiving a rejection notice or phone call concerning a rejected IBR request. When questioned why my application was "too early" (even though I followed their verbal instructions when I submitted my IBR application), they told me that my loans were in a "grace period" and therefore "too early." This is also not true as I have been out of school for almost 2 years at that point. Then they told me that they did not know why my application was "too early" and that I will have to speak with a supervisor.

Is it possible to apply for IBR "too early?" Even when they verbally instructed me to submit my IBR application at that time? Regardless, they had my application and relevant tax forms in their file and I would not have submitted, nor would I have been required to submit, anything different than I already did (e.g.. my taxes were filed and that information would not have changed from the time I submitted my IBR application "too early" to the time I, according to them, should have submitted it).

I feel like they are trying to screw me on a "too early" technicality when they actually mishandled/misapplied my IBR application.

[A_Little_Help]

Is anybody aware of any restrictions on when a borrower may submit thier IBR application and tax information?

I spoke with my loan servicer and they informed me that my IBR application was denied because it was submitted "too early." According to them, I cannot submit my application more than 60 days before the end of my current annual IBR payment period. I believe this is incorrect. It is my understanding that 34 CFR 682.215 governs the income-based repayment plan. There is nothing in there that places any restriction on when a borrower must submit thier application and paperwork e.g. there is nothing in there that states that a borrower must submit an application within 60 days from the end of thier current IBR payment period and anything submitted before that range must be denied.

Here's the break down of what happened, as confirmed by my loan provider:

November 2012: 8 of my 11 student loans reported 60 days past due. 3 were reported OK.

August 3, 2012: the due date of my NEW annual IBR billing period (payment is due on this day); since my IBR qualified me for $0 payment; I did not send a payment because it would have been $0.

July 3, 2012: the date my EXISTING IBR billing period end date

May 3, 2012: this is approximately 60-days before my existing IBR billing period end date; according to my loan holder I cannot submit IBR application before this date

April 20, 2012: I provided my IBR application and tax information; this is approximately 13 days before when they believe I should have provided it.

I called the Ombudsman's office and they told me to request from my loan servicer the authority stating the window of time when I may submit my application. I already did that. My servicer told me that it is "unpublished" processing requirements given to them by the Department of Education. BS! I don't think they will be able to provide any regulation that forms the authority for them to deny my IBR application, as I don't believe there is any.

The Ombudsman's office wasn't really all that helpful though... They pretty much told me that I have to keep taking it up with the servicer...

Does anyone know at which point I can file a formal dispute with the Ombudsman's office? Do I have to file a written dispute with the loan servicer and the credit bureau's first?

[SCF]

The idea of a time limit isn't completely ridiculous, the IBR plan is supposed to be based on current income, and its also a processing disaster waiting to happen to have paperwork rolling around your system for months before you actually need to submit the request. Given what we know about the DOE computer system, I can easily see it being hard to store or submit that data ahead of time.

Go ahead and reply to the Ombudsman with the info you received and ask them about next steps.

[A_Little_Help]

Thank you once again, SCF, for the reply! I appreciate your insight.

I’m finding that there is little help out there for borrowers to interpret the regulations and other requirements that govern the repayment of student loans, specifically the IBR program. I’m also finding that loan holders frequently give misinformation and try to tell borrowers, “that’s just the way it is,” when in fact that might not be the case.

I guess I will continue to post my experiences here with the hope that it may help someone in the future.

After reading the regulations, specifically 34 C.F.R § 682.215 – Income-Based Repayment Plan, the Department of Education requires the borrower’s AGI from the preceding year to calculate the repayment amount for the current year. The regs allow, but do not require, the loan holder to request alternate documentation in case they believe that the borrower’s AGI does not reasonably reflect their current income. Having said that, once a borrower files their taxes with the IRS and an AGI amount is established, absent a request from the loan holder (or if the loan holder specifically requires you to provide alternate income documentation), that amount is used to determine the IBR repayment amount. That AGI amount does not change.

Additionally, my loan servicer told me that it generally takes up to 40 days to process the IBR request. My current IBR request is on day 27. My point is that though providing IBR information 74 days, as in my case, from the end of the current repayment ending date may seem like a long time, considering the processing time and that the AGI does not change, it really isn’t all that much in advance.

Also, the other servicer who managed my loans prior to my current servicer told me that as long as the taxes are from the correct year, they will keep an IBR on file and process it when their internal system is capable of doing so if they cannot process it when they receive it.

Furthermore, the current IBR regulation supports a borrower providing the IBR information well in advance of end of the annual repayment period. The IBR reg was amended in November 2012 with an effective date of July 1, 2013. The updated reg established a “due date” for a borrower to submit their IBR application/re-certification and also added in a time-line stating when the loan holder must provide notice to the borrower of that due date. The due date for a borrower to submit an IBR application established by the regs is 35 days before the end of the current annual repayment cycle (presumably to account for processing time). The loan holder must give notice of the due date to the borrower no earlier than 90 days and no later than 60 days before the due date. So, notice of the due date must be provided by the loan holder to the borrower up to 125 days (90 + 35; over 4 months) and no less than 95 days (60+35; over 3 months) before the end of the current annual repayment period.

Other than the providing the IBR application/re-certification by the due date, there is no explicit restriction on when a borrower may provider the IBR information. Presumably, it is reasonable for a borrower to provider their IBR application/re-certification at any point within the timeframe that the loan holder must provide the notice: e.g. if the loan holder must provide you notice that the information is due by a certain date, then they should be able to accept it any time after they are required to provide notice.

Considering that the Department of Education amended the regs to provide this timeline, I believe that they assumed it to be a reasonable timeframe to give the borrower notice of the due date. It also implicitly establishes a reasonable timeframe for the borrower to provide the information; although, again, there is no explicit restriction on when a borrower may provide the information.

I understand this timeline was not in place in 2012, but if you apply it to my situation, it further shows that I provided my IBR re-certification within a reasonable time before the end of my annual IBR repayment period:

July 3, 2012: the end of my annual repayment period

May 29, 2012: the due date of my IBR re-certification (July 3 – 35 days)

April 20, 2012: the date I submitted my IBR re-certification; well within the loan holder notice “window”; 39 days before my due date; 74 days before the end of the annual repayment period

March 30, 2012: 60 days from the due date of my IBR re-certification; the latest date that the loan holder must provide notice of the due date

February 29, 2012: 90 days from the due date of my IBR re-certification; the earliest date that the loan holder may provide notice of the due date

[A_Little_Help]

Another point occurred to me last night that supports allowing a borrower to submit their IBR re-certification well in advance of the end of the re-payment period… I apologize for the rant too…

(See the note at the bottom of the post)

Before the amended IBR regulation, if a loan holder did not receive the IBR re-certification with sufficient time to process it and apply it to the borrower’s account, the only recourse for the borrower was to request forbearance to extend the time for processing. Considering the draconian effect of forbearance on the principal amount of the borrower’s loan, not providing their loan holder with the IBR re-certification with sufficient time was risky at best for the borrower.

Outside of some specific exceptions, during forbearance, interest is capitalized. That means that any interest which accrues during the forbearance period is added back in the loan, thereby increasing the overall amount owed and increasing the amount subject to more interest. That is not fair to any borrower, but for borrowers with a lot of student loan debt, 100K-200K+, the amount of capitalized interest can be significant.

My loan holder asserts that it is reasonable and appropriate to deny and reject an IBR re-certification submitted more than 60 days before the end of the annual repayment period. Because the IBR processing time can take up to 40 days to process and apply to the account, that gives borrowers an unreasonably small 20-day “safe” window to submit their IBR re-certification: if they submit more than 60 days before the end of the annual repayment period, they run the risk of it being denied; if they submit after 40 days before the annual repayment period, they run the risk of having to request forbearance to allow the loan holder more time to process the request and subject themselves to capitalized interest. Considering mail times, mail processing times, the possibility of error on either side (the borrower submitting incorrect paperwork or the loan holder “losing” the documents, for example), and any other time required to submit the IBR re-certification, a 20 or day submission window is very, very small.

Denying an IBR re-certification on the grounds that it was submitted 13 days before (an already improper) 60 day submission window is NOT reasonable. Furthermore, my loan holder maintained my IBR re-certification in my file and it is still there currently. The information contained in my IBR re-certification, my AGI and all other information, would not have changed. Completely ignoring a valid and sufficient IBR re-certification that would have qualified me for $0/month payment and implementing a repayment structure based upon a standard repayment schedule with a $1,000+/month payment is NOT acting in good faith.

Not to mention that when I called them initially to submit my IBR re-certification that they told me to submit it at that time and instructed me to hand-write a specific message on my fax cover sheet; not to mention that when I called to inquire about my account shortly after I submitted my IBR request that they told me that IBR was/is being applied properly to my account; not to mention that they maintained 3 of my loans with a $0/month payment while 8 of my loans had the $1,000+/month payment.

If someone can take anything away from my situation it is to NEVER completely rely on what the loan holder’s representatives tell you over the phone without anything else to back it up; ALWAYS confirm EVERY important detail; ALWAYS check on your account to make sure it is being processed properly; ALWAYS keep a paper trail!

(Note that the amended IBR regulation prevents interest from being capitalized during forbearance applied specifically to extend the IBR processing time as long as the borrower provided the IBR re-certification by the due date; however, there was nothing preventing capitalized interest on forbearance to extend processing times in 2012, which is the relevant time for my issue)

[A_Little_Help]

Just an update... I recieved the email in response to my request for the regulations/law/any other authority authorizing my servicer to deny my IBR re-certification on the grounds of being submitted "too early" and, as expected, the email merely stated that my re-certification was denied because it was sent in more than 60 days before the end of the annual repayment period. No authority was provided.

The regulations in place at the time of my re-certification state that they may re-calculate a borrowers repayment amount based upon the standard repayment plan if the borrower FAILS to renew the income verification information. There is nothing in the regs nor have they provided me with anything other than an arbitrary and unreasonable deadline established BY THEM that authorizes them to deny an IBR request based upon sending it in approximately 77 days before the end of the repayment period.

The regulations in place now state that the loan holder may re-calculate a borrower's repayment amount based upon the standard repayment plan if ONLY if (1)  the borrower elects not to remain in the IBR program; (2) if the borrower is determined not to have a partial financial hardship (e.g. has an income that no longer qualifies for the IBR program); or (3) if the borrower does not provide the IBR re-certification information within 10 days of the date that the information is due (which is established by the regulations as 35 days before the end of the annual repayment period), UNLESS the loan holder is able to determine the borrowers new monthly payment amount before the end of the borrower's current annual payment period.

By codifying (making law) the language above and the timeline for submitting IBR re-certification, it seems like the regs intended to fix the very problem that I am encountering right now.

Meanwhile, my loans are racking up capitalized interest while they are still processing my current IBR request. Had they processed my IBR request properly to begin with in April, 2012, my loans would not have been subject to capitalized interest and I would not have any negative reporting on my credit report. My IBR request is currently on day 32 since they recieved it. I was told today that it could take two more weeks to process.

[b_seeker]

This sounds similar to an issue I had when my loans transferred from Direct Loans to GLELS. I had been approved for IBR (for $0 as well) while Direct Loans held them. Great Lakes took over (luckily while still in grace) and told me I should have never had my IBR request processed as it was too early for that and the request can't be processed until the first payment becomes due (Which is a lie. They processed my request two days later, still in grace, abiet near the end of the grace.)

They basically gave me a terrible run around about this whole process and I eventually had to figure it out myself because their reps continually told me wrong info. I'm sorry this had to happen to you in a way that affected your credit. I do think I remember reading that you can get forbearance retroactively applied. Perhaps whenever they get your info processed (which 32 days is FAR too long and you need to contact someone with more power at this point, IMO), you can either request they applied this to your previous payments or attempt to force them to via the ombudsman.

[A_Little_Help]

Thanks for the reply b_seeker.

Forbearance will bring any past due amount current but it will not remove any negative reporting, which seems contradictory but thats they way it is.

It's also contradictory that defaulted loans can be rehabbed and some loan services will remove ALL negative reporting after the rehab process. So, i could have let them default, rehabbed, and been in a better position than I am now. Seems backwards to me...

As an update I contacted the Ombudsman and provided my case worker with all my info. It's looking optimistic from talking with her but the servicer has not gotten back to her initial contact yet so we'll see what happens.