Students' $1T in Debt Comes With Complaints About Lenders
NEW YORK (TheStreet) -- It's a double-downer for student loan borrowers, who face steadily higher debt burdens and are more likely to file complaints against student loan lenders -- conclusions drawn in a comprehensive report issued by the Consumer Financial Protection Board.
In it, the CFPB says:
- Outstanding student loan debt stands at just over $1 trillion.
- Private student loan debt only accounts for about $150 billion.
- There is about $8 billion in private loans already in default on roughly 850,000 student loans.
- The CFPB has handled 2,900 private student loan complaints in less than seven months.
- The average amount of what the CFPB calls "relief amounts" from those complaints was $1,572.
- 87% of all complaints against college lenders were concentrated on just seven companies
Aside from the huge amount of cash owed by student loan borrowers, what issues are college loan consumers most upset about? The CFPB notes that they're the same issues that vex mortgage borrowers, specifically:
- Improper application of payments
- Drawn-out loan error resolutions
- The inability to reach the right lender contact to resolve a problem
- Too much paperwork
- Inability to refinance a loan or modify debt
"Student loan borrower stories of detours and dead-ends with their servicers bear an uncanny resemblance to problematic practices uncovered in the mortgage servicing business," notes CFPB Student Loan Ombudsman Rohit Chopra, the lead researcher on the report. "Consumers deserve clarity, not chaos and confusion."The overriding student concern is that lenders make the entire experience a hassle for borrowers. The CFPB says:
By far the most common concern communicated by borrowers has been the difficulty negotiating a repayment plan with their servicer in periods of unemployment, underemployment or financial hardship. Many borrowers report frustration that they are unable to identify appropriate personnel that can make a determination about their repayment options.Being a government agency, its not exactly a surprise that the CFPB comes down hard on private student loan providers and doesn't hold any similar positions on government student loans, at least in this report:
Before the financial crisis, the private student loan market boomed and many consumers borrowed significantly to pay for postsecondary education. But unlike federal student loans, private student loans generally have higher and variable interest rates and may not allow borrowers to easily manage their payments in times of hardship.The CFPB aims to take a stronger stance against student loan abuses. It says it's gearing up to handle more borrower complaints and to hold private loan firms more accountable for the way they run their businesses. On the financial front, the CFPB reports that student loans have passed credit cards as the highest amount of unsecured consumer debt. That's a bigger problem than lousy service -- it's a $1 trillion problem that only grows worse, leaving younger Americans in debt just as they're trying to find a job in a troublesome economy.
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