U.S. Department of Education data show that nearly a quarter of the more than 43 million federal Student Loan borrowers are in trouble with their loan payments. These borrowers need high-quality, timely assistance, but, unfortunately, the student loan servicing industry has long been rife with misconduct, said Joanna K. Darcus, attorney for the National Consumer Law Center.

The consequences of servicers’ misconduct are significant and, at times, catastrophic for borrowers’ financial lives, Darcus said. Sloppy practices by servicers created obstacles to repayment, raised the costs of debt, caused distress, and ultimately contributed to driving struggling borrowers to default, according to an April 2017 Consumer Financial Protection Bureau report based on student loan borrower complaints,.

Specifically, many eligible borrowers aren’t enrolled in income-driven repayment or IDR plans despite clear benefits to the financial health of borrowers and their families. Instead, servicers steer many borrowers into forbearances and deferments, which are profitable for the servicer and costly to the borrower.

Servicer misconduct leading to default exposes borrowers to aggressive federal debt collection practices. The amount the government seizes using wage garnishment and offsets of Social Security and tax refund, including the Earned Income Tax Credit, often is far greater than the payments borrowers would have been required to make under an IDR plan, she said. The consequences of default include damage to borrowers’ credit histories, an increase in the cost of access to further credit, and potentially the erection of barriers to accessing employment and housing.

Darcus said quality servicing is especially critical for addressing racial disparities in student loan outcomes. On average, black students graduated with about $7,400 more student loan debt than their white peers, a Brookings Institution 2016 analysis by Judith Scott-Clayton and Jing Li found. In addition, black and Latino students are also targeted for enrollment and overrepresented in high-cost, low-quality predatory schools.

Borrowers harmed by servicer misconduct need real relief, she said. Reining in servicing misconduct and errors requires robust public oversight at the state and federal levels. Although some states have stepped up to protect their residents, borrowers nationwide also need and deserve for the CFPB to provide stronger oversight and for federal loan servicers to provide better assistance, Darcus said.

She testified Tuesday before the U.S. House Financial Services Committee’s Oversight and Investigations Subcommittee at a hearing “An Examination of State Efforts to Oversee the $1.5 Trillion Student Loan Servicing Market.”