Student loan borrowers – whether they have federal or private loans – continue to struggle when repaying their loans due to a range of obstacles, according to the Consumer Financial Protection Bureau's (CFPB) annual report on student loan borrower complaints. Of the more than 20,000 complaints analyzed, borrowers reported encountering problems enrolling in income-driven repayment (IDR) plans, facing obstacles getting loans discharged for disabilities, and being unable to obtain flexible repayment terms during times of financial stress.
Overall, the CFPB handled approximately 12,900 federal student loan servicing complaints, 7,700 private student loan complaints, and approximately 2,300 debt collection complaints related to private or federal student loan debt between Sept. 1, 2016 and Aug. 31, 2017. The CFPB began accepting complaints related to federal student loan servicing in February 2016 and has been collecting complaints on private student loans since March 2012.
In total, the CFPB has handled more than 50,000 student loan complaints and has returned more than $750 million to student loan borrowers through its enforcement actions, according to the report.
"Today's report shows that complaints by student loan borrowers led to hundreds of millions of dollars in relief and important market reforms," said CFPB Director Richard Cordray, in a statement. “We will continue to work to address ongoing problems raised by borrowers and hold student loan servicers accountable for treating them fairly."
Still, borrowers continue to identify many issues related to billing, customer service, borrower communications, enrolling in IDR plans.
The majority of the 12,900 federal student loan complaints received (71 percent) were related to borrowers dealing with their lenders or servicers. Another 28 percent were related to struggles repaying their loans, and 2 percent were related to problems with their credit report or credit score. Student loan servicer Navient received the bulk of federal student loan complaints, with 61 percent of the total. Complaints about AES/PHEAA made up another 15 percent.
Although there are several IDR plans borrowers can choose from, the most common complaint from federal student loan borrowers was having trouble enrolling in such a plan. The CFPB has several times explained the breakdowns in communication that can lead to problems enrolling in IDR plans.
The CFPB also found that more vulnerable borrowers – such as those with disabilities or military borrowers – may be “more acutely" affected by flaws in loan servicing. Borrowers with permanent disabilities, for example, have struggled with navigating the process to have their loans discharged.
“When borrowers cannot afford their monthly payments and are unable to access their discharge protections, they become at risk of default," the report said. “Borrowers who are disabled complain to the Bureau that when their federal student loans default and their Social Security disability benefits are offset, they struggle to afford basic necessities like housing and medication."
Military borrowers also continue to raise issues with obtaining protections provided to them under the Servicemembers Civil Relief Act (SCRA), such as a cap on interest rates.
Similarly, the majority of private student loan complaints (61 percent) were related to dealing with lenders and servicers, and struggling to repay loans (35 percent). Private student loan borrowers said they found it difficult to obtain flexible repayment terms when under financial distress, such as unpaid parental leave or employment furloughs.
Private student loan borrowers also submitted complaints about struggling to access advertised loan benefits. Borrowers and co-signers with severe disabilities also said they had limited options for repayment when they could no longer pay.
The CFPB again called for some sort of student loan servicing standards in order to hold servicers more accountable and improve customer service for consumers.
“As borrowers continue to fall through the cracks of our broken student loan system, the Bureau's work to date offers a roadmap for consumer-driven reforms," said CFPB Student Loan Ombudsman Seth Frotman, in a statement. “When borrowers are empowered to stand up for themselves, they can shape policy and spur government to take action. We have much more work to do to build a student loan market that works better for consumers."
Publication Date: 10/18/2017