Are you having problems with your student loans? Struggling to understand a loan servicer’s decision? Confused by the federal government's new repayment plans and wondering what to do?
Kelsey Lesco and her small team are ready to help.
She is Colorado’s student loan servicing ombudsperson. Colorado is one of about 16 states that have an ombuds office to help borrowers navigate complex issues with their federal or private student loans and resolve disputes with servicers.
For federal loans, the government decides the rules and interest rates, but private companies manage the repayment plans. These companies are regulated by the states where they operate.
Colorado has almost 800,000 student loan borrowers.
The office has several key jobs:
- It licenses and regulates student loan companies, such as MOHELA and Nelnet.
- It helps borrowers deal with their loan servicer.
- It acts as a go-between with the federal Department of Education and servicers.
- It answers questions and handles complaints from borrowers.
“Our goal is when people come in here, we want to put them in a better position than they were when they reached out to us,” Lesco said
She emphasized her office can’t fix all the problems, but they can help people understand their situation and figure out what to do next.
Most of the complaints they receive are about federal student loan companies. The office can look into a borrower's account to investigate a problem. They try to fix the issue directly with the loan company. If they find bigger, systemic issues, they then work with the federal Department of Education.
Borrowers can submit a complaint about a loan servicer here. Federal loan borrowers can log onto the Federal Student Aid office to get the status of their loan.
Big changes for borrowers
It's widely agreed that the federal student loan system was already very complicated before the Trump administration. Over time, new rules were added without removing old ones, making the system confusing. But President Donald Trump’s tax and spending bill ushered in seismic changes to student loans that are making borrowers nervous.
“There's been a change in tone to people being more driven to get on the right track,” said Lesco.
Here is a federal government summary guide to the changes.
“Over probably the past six months, what we're seeing is an increase in the borrower's level of stress and confusion overall,” said Lesco.
Fewer repayment plans
The government is getting rid of many different repayment plans, like the popular SAVE program, by 2028. They will be replaced by two new options:
- A single, standard income-driven repayment plan: You no longer need to prove you have a financial hardship to qualify.
- The Repayment Assistance Plan: This plan sets your minimum monthly payment based on your income, starting at just $10. It also extends the time it takes to get loan forgiveness to 30 years. Read more information.
The SAVE repayment plan has been in forbearance for over a year due to a court ruling. Interest began accruing in August, leaving people confused about whether they should leave the plan before the July 2028 deadline or stay in it, said Lesco. New borrowers after 2026 will only have access to the new standard repayment plan or the RAP.
What borrowers should do depends on their financial situation and what their goal is for paying off their loan.
Changes to loan limits
- Parents who take out loans to finance their children’s education can only borrow up to $20,000 per year, with a total limit of $65,000 per child.
- New graduate student borrowers after July 2026 will be limited to $20,500 a year with a total limit of $100,000.
- Professional students, like law or medicine, will have a limit of $50,000 per year, up to a total of $200,000.
Public service loan forgiveness
The ombudsman's office handles a lot of complaints about the public service loan forgiveness program. It is supposed to forgive the remaining loan balance for public service workers after they make 120 qualifying monthly payments.
“One problem that we see a lot from borrowers is that they're getting kind of ping pong between the two entities where, a servicer may say, ‘Well, we don't handle the public service loan forgiveness, and we can't help you with this issue’ and then they get sent over to federal student aid who says, ‘Well no that's incorrect.’”
In 2023, the Biden administration created a special buyback program to give borrowers credit for certain periods of deferment or unwanted forbearance (sometimes from servicer mistakes), which allowed borrowers to make a one-time payment to wipe out their loan earlier. But there is a backlog of 72,000 applications. This means borrowers are still making payments that could be potentially forgiven.
Defaulted loans:
In May, the federal government started collecting defaulted loans, the first time since the pandemic began. A loan is in default when a borrower hasn’t made a payment in nine months. The government has many tools at its disposal: it can seize wages, tax refunds and even some social security benefits.
Lesco doesn’t have hard figures on how many Coloradans are in default, but there are 5 million borrowers in default nationwide, and another 4 million more are 90 days overdue.
“The fact that you have this high number in late-stage delinquency means we're likely to see even more people in default.”
Lesco said she understands it is a stressful time for borrowers, but they need to pay attention now.
“You can't just put your head in the sand right now. You need to take control of your own loans. There are options to get out of default.”
The first step is log in to StudentAid.gov to determine your loan servicer and loan status, contact your loan servicer to understand your options, like loan consolidation or whether you qualify for a program called loan rehabilitation.
Application backlogs:
As of late July, there were still 1.3 income-driven repayment applications pending and 72,000 PSLF buyback applications, according to the latest status report from a lawsuit. Borrowers have reported wait times of ten months, fueled by significant cuts by the Trump administration to the Federal Student Aid office.
Lesco knows borrowers may be on hold for a while, but she said servicers are there to help people pay their loans.
“Part of self-advocacy is not being scared to ask questions,” she said.
| Contact the Colorado Attorney General's Student Loan Ombudsperson: - By email at [email protected] - Filing a complaint at www.coag.gov/studentloans - By calling (720) 508-MySL (6975). |
| For federal loans in default, contact the Default Resolution Group. |
