Out of the $1.3 trillion student loan market, private student loans only make up a small portion of the industry. However, a news analysis by NerdWallet indicated that more private student loan borrowers expressed dissatisfaction with their lenders than any other student loan lender.
In 2011, the CFPB set up a system to address such complaints and has since noticed a significant increase in the number of complaints from borrowers about private student loan lenders and servicers. Out of the 5,000 complaints that we were made available on the Consumer Financial Protection Bureau’s Consumer Complaint Database, the chief complaint was that borrowers experienced severe difficulty in dealing with lenders.
Grievances of this nature made up 2,779 complaints. The difference between a lender and a servicer is that a lender issues and own the money borrowed. A servicer is hired by a lender to manage the repayment of the loan. Borrowers claimed that they:
- Had “trouble with how payments are handled.”
- Received “bad information” about their loan.
- Had issues with fees the amount of fees that were charged.
- Constantly received phone calls about money owed.
- Did not have sufficient information about how much they owed.
- Were unclear about the terms of the loan.
The second most popular complaint on the database was that many borrowers faced difficulty paying back their loans as a result of services and lenders failing to offer flexible payment plans. When borrowers default on a payment, lenders and servicers may pursue a court judgment against defaulters, which could ultimately lead to wage garnishments.
According to MeasureOne, the complaints received by the Consumer Financial Protection Bureau were minimal given astounding $99.7 billion student loan industry. It is important to note that the CFPB can only track those complaints that are reported to it. In addition, not all complaints lodged are valid. Disgruntled borrowers who may not be satisfied with terms of the loans, or those consumers who simply cannot pay may lodge complaints although the lender or servicer is not at fault.
To read more, please click here.