Obamacare Sends Little-Known Shiver Down College Loan Borrowers' Backs
Obamacare has inadvertently caused problems to as many as 1 million college loan borrowers so far -- as if students don't have enough to worry about.
The Department of Education has been transferring large batches of federal student loans to new loan-servicing companies -- leaving in the lurch some borrowers who are suddenly encountering problems with their loans, such as payments that are mysteriously adjusted up or down.
The switch, which has been going on for months and will ultimately include millions of loans, is mandated by a little-known provision tucked into the 2010 health-care overhaul. Pushed by a consortium of nonprofit student loan companies, the provision forces the DOE to use nonprofit loan servicers. But at least in the short run, the switch has caused problems.
As reported in Monday's ProPublica, "Borrower Isabelle Baeck said that after a new servicer, Mohela, took over her loans in December, she received a letter saying that her monthly payments had been reduced to $50 -- roughly a quarter of what they had been. The change meant Baeck would ultimately pay more in interest over a longer period of time. Concerned, she said she has made repeated calls to get the problem fixed, only to have the payments repeatedly readjusted."
Baeck is hardly alone. Since last fall, 1 million borrowers have had their federal student loans randomly assigned to one of the new nonprofits.