Interest Accrual Traps in Federal Consolidated Student Loans

This has bothered me for a couple of years now.

Most of the headaches in my life come from the radical mismatches between the demands of the different bureaucracies that seem to work as millstones to constantly grind me down.

One such clash is Social Services Requalification vs. Student Loan Deferment.

Currently I am supported by general assistance ("GA&quot welfare for disability while I have been waiting (for several years) to get through the SSI Disability application process. I have to re-qualify for GA in December of every year.

So here is what happens.

In December I do the financial qualification for GA. I ask Social Services if they need my medical information. They tell me not unless I get a letter from Social Services asking for it. Because I'm an old hand at how this system can screw you, I try to get a copy of the forms I will need to provide my doctor with before I leave. There are no copies in available, so I make complaint phone calls until I get them mailed to my home address.

In January I get the usual letter from Social Services saying all my medical records have been lost going back to 2012, and so I have been placed on a 3 month delimited period of GA. (This is what non-disabled people get - only 3 months of welfare). If I want to get back on GA for disability I need authorization from my doctor. I need to wait for my next doctor's appointment to do this. (Just this bureaucratic piece sucks in itself because it's difficult to get these appointments, and this one will be used up by paperwork.)

In February, I get a letter from Navent, the Student Loan agency, saying my Student Loans are due. I am mystified since I last completed the Deferment process in April and requested that the Deferment be through the next April when I know the Social Services bureaucracy matters should be settled. The Student Loan agency says: nope, your deferment ended in February. I have to ask for a Forbearance (during which time my loan will accrue interest) while I get my GA status straightened out.

By the end of February I have my doctor's letter, but Social Services does not generate a new letter giving the new dates for my GA benefit. The only letter I have with dates on it is the 3 month one. When I call, the only letter the Social Services caseworker can make their computer generate is one from September, 2014 which corrected a Social Services error. That one doesn't have any end date on it.

It is now more than half way through March. The previous Forbearance has expired, so I have to get ANOTHER Forbearance. While discussing the problem with the phone rep, she points out that I can't ask for the Deferment to start for more than a month in the past, so no matter what, interest is going to accrue on my student loan because of this. While talking, we also figured out why my previous Deferment lasted only 8 months instead of the 12 that it should have: according to my GA paperwork, my benefits only went though December, so that's how long they deferred the loan. Everyone left out the whole 2-3 month bureaucratic BS padding time in which I have to schedule a doctor's appointment and get a new medical letter!

Moreover, it's not certain the Student Loan agency is going to accept this new Social Services letter that starts in 2014 and doesn't have an end date. It's not an award for the year - it's an amount change letter. However, Social Services seems incapable of providing a letter the computer doesn't automatically generate.

By the time I get the Deferment paperwork in, and they tack on only a month of Deferment into the past, a month of Interest will have accrued. That doesn't seem like much, but there was also some "leakage" of this type last year, and various problems like this in previous years. But the biggest problem of all was when I was trying to get the loans consolidated. During the time I was in grad school, some of the loans had illegally accrued interest and then been resold several times over. There was absolutely nothing I could do to roll this back. I wanted to consolidate them so this reselling would stop happening. But once they were consolidated, these interest add-ons were set in stone.

As a result, I started off with student loans about 1/3 larger than they should have been. So I resent even smallest interest "sneaks" that serve to inflate the amount further.

I do realize that there's a disability discharge for student loans, and I will probably be eligible for it somewhere along the way. However, I also suspect I'm not the only one affected by this problem, so I'd rather put it out there and see what people think. Perhaps President Obama could win some brownie points just by fixing/rolling back some of these unjust interest accrual issues.