Many more private student loan borrowers turned to the Consumer Financial Protection Bureau (CFPB) this year than last for help with their servicers and loan repayment terms, a new report says.
Of about 5,300 private student loan complaints to the CFPB since October 2013, 57 percent related to either “repaying your loans” or “dealing with my lender or servicer,” according to the “Annual Report of the CFPB Student Loan Ombudsman.” Another 41 percent of private student loan borrowers’ complaints were filed as “problems when you are unable to pay” or “can’t repay my loan.” Just two percent of complaints surrounded issues getting a loan in the first place.
“Most frequently, borrowers submitting complaints are seeking to modify repayment terms to obtain a payment they can actually afford,” the report notes.
Complaints to the CFPB spiked 38 percent from the previous year. Many came from borrowers who wanted to make some payment to avoid default, but who couldn’t meet their full amount and couldn’t find alternative options.
“Consumer complaints suggest that there is a lack of transparent information on methods to avoid default, potentially due to lenders and servicers not adequately providing information to consumers about available repayment plans or the lack of clear information available on the lender’s or servicer’s websites and online servicing platforms,” the report states.
Some of these borrowers had an easier time securing alternative repayment plans for their federal student loans and expected a similar process for their private debts, according to the report.
“Many servicers manage both federal loans and private loans for individual borrowers, and some are not effectively communicating that certain programs are available for some loans and not for others, which may be contributing to borrower frustration and driving complaints submitted to the Bureau,” the report concludes.
NASFAA has long advocated for a move to full school certification for private education loans, which would help financial aid administrators to better counsel their students. Most recently, NASFAA member Ken Kocer stressed the importance of such a requirement to members of the Senate Committee on Banking, Housing & Urban Affairs during the “Financial Products For Students: Issues and Challenges” hearing.
Publication Date: 10/17/2014