Play Audio Clip Listen to audio clip.

Play Audio Clip Listen to audio clip.

By FOX's Eben Brown

Debbie Baker went back to school to become a teacher, taking out federal loans that she was told would qualify for partial forgiveness over time provided she kept current on payments. After graduation, he servicer sent her a shocking first bill.

"They wanted $500," she exclaimed. She protested that she couldn't make such payments and was offered to put the loans in forbearance, meaning she could delay repayment. 

"They refused to take partial payments," Debbie recalls." It was my whole paycheck that I give to them, or I take the forbearance." 

They eventually consolidated her loans and placed her under a repayment plan called Income Based Repayment or IBR. And she verified, at the time, that payments made timely would still qualify for the public service forgiveness she was seeking; public school teachers in the program can have their federal loan balances canceled if they make timely payments for a set number of years.

But the loan servicer, at this point, started making many mistakes. 

"They would file incorrect IRS forms, trying to get my tax transcript. They would stamp my signature," she says. "They even said I bounced a check, which my bank says 'No, it was never presented.' They posted the check. They reversed the payment."

And then one day, a letter arrived.

"I'm so excited," Debbie recalls. "My husband is coming home, and I was going to tell him, 'Honey we made it!'."

"You've been denied," a devastated Debbie read. "All this time, they let me pay for thirteen years on an incorrect loan."

Looking at their amortization schedule, Debbie learned she barely paid anything over her 13 years of on-time payments. Now, the servicer said, Debbie was responsible for a very large balance bill. 

"Over $76,000," laments Debbie. "I only borrowed $34,000 to start with. I was within about $1,500 of paying that. They put $34.24 to principle. That's it. That's all."

Mark Goudy, from Columbus, Ohio, paid for school with private student loans.  

"I didn't find that great job we were promised after college," Mark says.

Mark tried to work something out with his loan servicer, who Mark said, had little interest in helping him.

"They would refuse to speak to me unless I made the payment in full," remembers Mark. "It wasn't even the payment that was due that month. They wanted full payment of the loan, like $40,000, or whatever it was."

Unable to make payments, Mark started getting phone calls and letters. One day, the servicer of one loan sent him a letter saying they'd consider him all caught up if would just make a large payment.

"'If you pay us a $1,000 we're going to just wipe away the past due amount. We're going to apply that thousand dollars to that loan and you'll be in good standing'," remembers Mark. "Well,  I just happened to come into a little money. I got my inheritance from my grandmother. I actually sent them $1,200. And the day after that payment cleared, they called that loan."   

Soon after, the loan servicers started reporting late payments to the credit bureaus. At times, Mark says, their reports weren't truthful. Mark found that out when tried to buy a car.

The servicer "reported my loan as past due, which it was not, at all," recalls Mark. "It was current. And my score dropped 78 points, which raised my monthly car payment $40 from what had been quoted before. And I did dispute that and it was removed within a matter of a few days, but then my score only went up two points."

Mark isn't sure what more ripple effect's he'll face. He's starting to challenge the claims made against him. 

Debbie, however, says she and her husband can't retire until their balance is paid. And they lack the funds to make it go away instantly. 

Ever since laws passed in the 1990's amending the federal bankruptcy codes, student loan debtors in trouble have had very little recourse in staving off collectors and challenging debts. The courts require they prove a murky standard of "undue hardship." Most attempts to reach this standard do not succeed in court. A legislative attempt to change the law to again allow student loans be simply discharged is being debated.

Watch Eben Brown's complete video below and listen to his five-part series on this week's 'FOX News Rundown' podcast. 

Follow Eben Brown on Twitter: @FOXEbenBrown