How Virginia’s new student loan ombudsman helps borrowers

Student loans: Just over a million Virginians have $38 billion worth of them and have made thousands of complaints about confusing rules, ballooning balances and misapplied payments to the federal government in the past three years.

Since January, students have been able to send concerns to Scott Kemp, the state’s first student loan ombudsman.

He’s worked on 107 cases in his first nine months.

“It was a little bit more than we had anticipated, which is a good problem to have because people are finding the office and coming to us for help,” he said in an interview. “The negative behind it is that there are a good number of cases that are stalled. There are things that I can’t fix; things that require legislative fixes.”

Kemp’s primary job is to advocate for borrowers and mediate problems between students and loan providers. He has no regulatory or investigative power.

Sen. Janet Howell, D-Arlington, and Del. Cia Price, D-Newport News, sponsored legislation to create Kemp’s position. Howell said it would help students caught up in the “unfair” student loan industry.

Before Kemp’s position existed, borrowers had few options for recourse if they thought their loan was being mishandled. 

“I really spend a good amount of time reinstalling hope,” Kemp said. “Most of the people that come to me are just exhausted dealing with their student loan issue on their own.”

In recent months, tens of thousands of people across the country have found out they don’t qualify for some public loan forgiveness programs. Kemp said about 10 of his cases have been related to loan forgiveness programs.

“I have state workers in their 60s, close to retirement for loan forgiveness and can’t get forgiveness,” he said. “It’s very unfortunate.”

One of those people who found out they don’t qualify for forgiveness is Del. Mike Mullin, D-Newport News. He didn’t bring his case to Kemp.

Mullin, the assistant Commonwealth’s Attorney in Hampton, said he took out more than $82,000 worth of student loans for law school and has repaid roughly half. Mullin said he was assured he would qualify for loan forgiveness when the program was introduced in 2007, as long as he made on-time payments for 10 years.

Last month, he applied for it — only to be told his loans didn’t qualify.

“Pardon me for a moment while I start throwing furniture,” he tweeted.

“We delayed buying a house because we thought we would have more money,” Mullin said in an interview. “It affects when and how many children you have, it affects how you save. It was a decade of financial family planning and then to have someone say, ‘Nope our bad,’ that’s pretty upsetting.”

Mullin filed an appeal with the federal Department of Education, but he’s not optimistic he’ll be granted forgiveness. Right now, he thinks he will be paying off all of his loans on a public prosecutor’s salary (he makes $78,100 a year), something he anticipates will take him at least until his young children are in college.

“I’ll be making these payments until the day I die”

Borrowers also can report issues to the Consumer Financial Protection Bureau. It has regulatory authority, but according to data about Virginia complaints, most are closed with an explanation suggesting the borrower misunderstood the process or terms of their loan.

Virginians have made more than 1,200 complaints about student loans to the Consumer Financial Protection Bureau since 2016. Almost half of them have been about Navient, a company that took over loans from the private Sallie Mae and is facing lawsuits in six states.

Kemp said a number of the 107 cases in his office involve Navient but none have risen to the level of taking legal action. 

If Kemp finds a complaint worthy of investigation, it goes to the Attorney General’s office. 

So far, none have been referred there.

One complaint to the Consumer Financial Protection Bureau was about a loan co-signed for a now-deceased son. According to the complaint, Navient agreed to receive a final payment, returned it as an overpayment but credit agencies were still showing an open student loan account.

“I notified Navient and the three credit reporting agencies and provided a copy of my son’s death certificate,” the complaint noted. “The reporting agencies show an active account when in fact the loan should be paid off and closed out.”

In another complaint, also to the Consumer Financial Protection Bureau, the borrower wrote: “We have been harassed over the years. I know for a fact that I’ll be making these payments until the day I die.”