Why Your Loan Servicer May Not be the Best Place to Find Help
Recently Michael Lewis, author of the Wolf of Wall Street, had a podcast episode speaking of the student loan crisis. One of the significant points he brings is that your loan servicer is not giving you the best advice.
In my experience, Michael Lewis is correct. I have personally spoken with many borrowers who reached out to their loan service and received advice that cost them thousands of dollars. Some have even lost out on forgiveness. So, why does this happen?
The 7 Minute Rule
Michael Lewis specifically spoke of Navient having a 7-minute rule. Navient measures their customer service representatives by their ability to finish calls within 7 minutes. They do not judge employes by how well they solve the customer's problem, but by how fast they get off the phone.
Sadly, often, the best solution is for borrowers to use one of the income-driven repayment options. These options are also some of the most lengthy conversations to talk through. When I create a student loan plan, it can take 3 hours of work, not a 7-minute phone call.
Call Center Jobs Suck
I have experience in call centers, and they are not great jobs. They are a modern factory — finely tuned machines, with eagle eye supervisors watching your metrics all day long. Spend too long on a call, and you will hear about it.
Since these jobs are not desirable, the employees there are not often there by choice. Let's be honest; when we are talking to a person in a call center, we are not very polite. Add these pressures to the low pay and retail style hours, and you have a job most people do not want to keep for long.
The "best" representatives move up or move out. Not to mention that "best" is definded by the metrics the call center chooses to watch and not by how well you help your customers.
With this naturally high turn over, call center employees are not well trained. Try looking through the details on studentloan.gov and tell me that someone can master them in 6 months of work experience. It is just impossible to train a call center employee properly. You do not have enough time to spend with them.
The high turn over hits call centers hard in a second way. Not only do they leave before they can fully understand the complexities of student loans, but there is also a significant need to replace those that go. Since people are always moving, new hires cannot spend long periods off the phone being trained. They are needed on the phones.
How Are Services Paid
Most businesses have a degree of pressure from customers to provide a level of service that is acceptable. Sadly, student loan borrowers are not the customer. The federal government is.
Student loans are funded by the US Government, and the Department of Education hires loan servicers like Navient to handle the administration of the loans. Your loan servicer is then paid a flat fee for each loan it services. This structure encourages loan servicers to keep call center costs to a minimum, knowing that your satisfaction is not what matters.
Too Much Pressure to Give Good Advice
The system has too much pressure placed upon it to offer proper advice. Some services may do better, but I have not found one example of a customer receiving the most beneficial advice. Your loan servicer is an okay place to start, but before taking their information, do your research.