WASHINGTON—The CFPB’s latest monthly complaint snapshot shows that both private and federal student loan borrowers nationwide report persistent servicing breakdowns that may sideline their path to repayment.
“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.”
At $1.4 trillion, student loan debt represents the U.S.’s second largest debt market behind mortgages. In September 2015, the Bureau released a report outlining widespread servicing failures and sloppy, patchwork practices reported by both federal and private student loan borrowers. As of April 1, 2017, the Bureau had handled approximately 44,400 student loan complaints from consumers. Some of the findings in the snapshot include:
- Consumers complain about poor information from and sloppy practices by servicers: Of all the complaints the Bureau receives about student loans, over half (64%) are about problems consumers experience when dealing with their student loan servicer. Consumers who reach out to their servicer complain they are not informed about options that would allow them to continue repaying their loan, such as income-driven repayment plans. Rather, consumers complain that their servicer directs them into plans that suspend repayment and cause the interest on their loans to pile up. Consumers also complain that their monthly student loan payments are misapplied by the servicer, which the Bureau said it believes can cause a range of problems including negative credit reporting and loss of certain loan benefits, such as cosigner release for private student loans.
- Consumers complain about difficulty enrolling and staying in an income-driven repayment plan: Consumers complain about processing delays and inaccurate denials when submitting an income-driven repayment plan application to their servicer. These complaints include documents being lost by the servicer, application processing times spanning several months, missed payment towards loan forgiveness, and unclear guidance when enrolling into a new income-driven repayment plan. Additionally, consumers complain of receiving insufficient information from their servicers to meet recertification deadlines for their income-driven repayment plan.
- Consumers report confusion about their progress toward Public Service Loan Forgiveness programs: Consumers express concerns about their standing in Public Service Loan Forgiveness and other loan forgiveness programs. “These borrowers complain that after years of making payments, they learn that their loans are not enrolled in a qualifying repayment plan, despite borrowers telling their servicers that they were pursuing Public Service Loan Forgiveness. Other borrowers complain that their servicer did not explain that consolidating their loans would wipe out all previous progress made towards loan forgiveness,” the CFPB explained.
- Companies with the most student loan-related complaints: 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.
Other findings from latest snapshot report include:
- Complaint volume: For March 2017, debt collection was the most-complained-about financial product or service. Of the approximately 28,000 complaints handled in March, there were 8,711 complaints about debt collection. The second most-complained-about consumer product was credit reporting, which accounted for 5,498 complaints. Mortgages were third most-complained-about financial product or service, accounting for 3,965 complaints.
- Product trends: In a year-to-year comparison examining the three-month time period of January to March, student loan complaints showed the greatest increase (325%) of any product or service. The Bureau received 773 student loan complaints between January and March 2016, while it received 3,284 complaints during the same time period in 2017. Part of this year-to-year increase can be attributed to the CFPB updating its student loan complaint form to accept complaints about federal student loan servicing, starting in late February 2016, the CFPB said. The Bureau also initiated an enforcement action against a large student loan servicer during the time period covered by the latest report.
- State information: 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; with Montana up 54%, Georgia up 46%, and Wyoming up 45%.
- Most-complained-about companies: The top three companies that received the most complaints from November 2016 through January 2017 were Navient Solutions, LLC, Equifax, and Experian.
The Monthly Complaint Report can be found at: http://files.consumerfinance.gov/f/documents/201704_cfpb_Monthly-Complaint-Report.pdf