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How One Woman's Student Loan Payment Jumped From $200 to $1,400

There are many reasons a monthly student loan payment might increase — but from $200 to $1,400 in a single month? That seems like cruel and unusual punishment — but that’s exactly what one consumer told federal regulators happened because of a paperwork delay.

The 600% jump sounds hard to believe, but the complaint was recently cited by the Consumer Financial Protection Bureau in a warning it issued about a particularly sinister form of what it calls “payment shock.” Ironically, it comes as the result of a program designed to make student loan repayment more affordable.

A new student loan program that began in 2012 allows low-income borrowers to apply for income-based repayment plans. These plans cap monthly payments at a percentage of the borrowers’ income, ensuring they have money left over each month for basic necessities. So long as borrowers remain in good standing, unpaid interest doesn’t end up added to the loan balance, and payments are capped at 25 or 30 years, depending on the specific program.

But to make sure borrowers’ financial situation doesn’t change, each income-based repayment plan must be recertified annually — and that’s where the trouble is. If the paperwork isn’t completed on time, the payments snap back to their original amount.

In a blog post discussing the problem, Seth Frotman of the CFPB wrote that a remarkable 57% of borrowers in a Department of Education sample missed their paperwork deadlines. Making matters worse, since loan payments are usually auto-deducted from borrowers’ checking accounts, former students hit by snapped-back payments are often unaware of the situation until there’s a gaping hole in their checking account balance, which often leads to a cascade of financial problems, including potential credit damage. (You can see how your student loans are affecting your credit scores for free on

“When borrowers don’t recertify on time, their payments will snap back to the amount they would have owed under a standard 10-year repayment plan — a jump of hundreds of dollars per month, in many cases. This can be a shock to those already struggling to make these payments,” he wrote.

Why Are Deadlines Missed?

Whose fault is it when the paperwork isn’t completed on time? The CFPB has heard from consumers saying their financial institution was to blame, Frotman said.

“We’ve … heard about detours and dead ends that prevent you from keeping your payments affordable under these plans, even when you’ve filled out the required paperwork,” he wrote. was unable to contact the woman who complained her payments snapped from $200 to $1,400, and could not independently confirm the details of her situation, but here is what she told the CFPB. She blamed her loan servicer Navient for the screw-up:

I submitted the required documentation for the 2015 IBR repayment plan 8 weeks before the expiration of my previous IBR application, and within the time period Navient indicated. Due to Navient’s delays, my IBR application was not processed timely,” she wrote. “While waiting for them to process my application, monthly payment jumped from approximately $200 a month to $1400 a month, causing me to go into overdraft on my checking account. Navient failed to process my application timely even though my application was complete and no documentation was missing, and failed to communicate the huge increase in payment.

Nikki Lavoie, Navient spokeswoman, declined to comment about this specific complaint filed with the CFPB, but she did say that Navient strives to process renewals quickly.

“The standard is within 15 days but it is often sooner than that — to ensure that customers receive their renewal before their deadline,” Lavoie said. “We prioritize renewal recertifications nearing a deadline to help ensure a borrower’s payment doesn’t increase.”

Navient disclosed in an August filing with the Securities and Exchange Commission that is currently under investigation from the CFPB. The filing says Navient was notified by the CFPB that the agency’s office of enforcement is “considering recommending” legal action related to “disclosures and assessment of late fees and other matters.”

“The Company is committed to resolving any potential concerns,” the filing, dated Aug. 19, says.

The recertification problem is widespread, and not limited to any one loan servicer. According to Department of Education research, hundreds of thousands of students failed to recertify on time last year. Even worse, nearly one-third of that group ended up going into a hardship-related deferment or forbearance.

For students currently enjoying the protection of reduced monthly payments, the CFPB warns that it’s critical to make sure recertification is completed in a timely fashion. Failing to do so not only results in payment shock, but it can also impact accumulated interest waivers and the 25-year maximum payment clock.

The CFPB is currently reviewing comments about issuers with student loan servicers, and says it will issue a report about next steps in the coming months.

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