This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.05 -0.69%
FB $103.34 1.40%
GOOG $685.02 0.28%
TSLA $144.48 -4.00%
YHOO $26.81 0.19%


Chart of I:DJI
DOW 15,781.47 +121.29 0.77%
S&P 500 1,839.86 +10.78 0.59%
NASDAQ 4,276.3550 +9.5180 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs