The Consumer Financial Protection Bureau (CFPB) released a monthly complaint snapshot revealing that both private and federal student loan borrowers nationwide report persistent servicing breakdowns that may hinder the repayment process.
According to a press release, as of April 1, 2017, CFPB has handled approximately 1,163,200 consumer complaints across all products. In a year-to-year comparison examining the three-month time period of January to March, student loan complaints showed the greatest increase — 325 percent — of any product or service.
More than 44 million Americans have a collective $1.4 trillion in student loan debt — the nation’s second largest debt market behind mortgages. These borrowers rely on companies servicing their loans to manage all aspects of repayment, including providing them with available repayment options when they are struggling with their loans. Yet of all the complaints borrowers have — a whopping 64 percent — are about dealing with their student loan servicer.
“Student loan servicers play an important role in helping millions of people manage the loans they take out to pursue an education,” said CFPB Director Richard Cordray. “Unfortunately, borrowers continue to report difficulties and setbacks as they try to work with their servicers to manage their loan debt.”
Consumers complain they are not informed about options that would allow them to continue repaying their loan, such as income-driven repayment plans. Instead, their servicer directs them into plans that suspend repayment and cause the interest on their loans to pile up. There are also complaints that their monthly student loan payments are misapplied by the servicer, which can cause a range of problems, including negative credit reporting and loss of certain loan benefits.
And it appears that many servicers make it as difficult as possible for a borrower to enroll in an income-driven repayment plan: Consumers complain about processing delays and inaccurate denials when submitting an income-driven repayment plan application. In addition, borrowers report receiving insufficient information from their servicers to meet recertification deadlines for their income-driven repayment plan.
There is also a great deal of confusion surrounding borrowers’ progress toward Public Service Loan Forgiveness programs, with some saying that after years of making payments, they learn that their loans are not enrolled in a qualifying repayment plan. Other borrowers complain that their servicer did not explain that consolidating their loans would wipe out all previous progress made toward loan forgiveness.
The three companies that the Bureau has received the most average monthly student loan complaints about are Navient Solutions, LLC, Fedloan Servicing/AES, and Nelnet. Montana, Georgia and Wyoming experienced the greatest year-to-year complaint volume increases from January to March 2017, versus the same time period 12 months before.