An annual report on student loan complaints released Wednesday by the Consumer Financial Protection Bureau examines the problems experienced by certain student loan borrowers. CFPB officials report serious concerns about repayment problems facing those with older federal student loans made by banks and other private lenders as servicing issues often make it difficult for this group of borrowers to make payments.
The report analyzes complaints submitted between Oct. 1, 2014 and Sept. 30. During the 12-month period, the CFPB handled approximately 6,400 private student loan complaints, an increase of approximately 23% compared to that of the previous year. The CFPB also handled 2,300 debt collection complaints related to private and federal student loans.
The report found that federal student loans made by private lenders may have a greater rate of borrowers in default and delinquency than the broader student loan market, raising concerns about whether distressed borrowers with the loans are receiving adequate information on repayment options from their servicers.
Many debt collection complaints from borrowers with federal student loans describe how consumers attempt to avoid default during a period of financial hardship but have problems finding information about repayment options, including income-driven repayment plans.
Despite the right under federal law to enroll in an income-driven repayment plan, some borrowers report that they didn't know they were eligible. The CFPB also received complaints that borrowers who apply for an income-driven repayment plan are held up by paperwork processing delays, receive inconsistent instructions from servicers, or experience difficulty enrolling in these programs.
Federal student loan borrowers may have loans made directly by the Department of Education or loans made by a private lender. Most federal student loans were made by private lenders until 2010 when the program known as the Federal Family Education Loan Program, or FFELP, was stopped. These loans were once the most common way to borrow for college and borrowers with these loans still make up nearly a third of all student loan borrowers. From 2006 to 2009, these loans made up more than 75% of all new federal student loans. As of June 30, consumers still owe more than $370 billion in student loans made under this program.
The report offers recommendations to policymakers, calling for the compilation of regular performance metrics on student loan servicing, including data on delinquencies and defaults as well as data on borrower performance in income-driven repayment plans. Policymakers should consider compiling and publishing data on a periodic basis to facilitate comparison in performance among student loan servicers, the report recommends.