New CFPB report finds student loan servicers at fault

Inside Subprime: October 25, 2017

By Alex Huntsberger

A new report from the Consumer Financial Protection Bureau (CFPB) shows that most student loan borrowers’ complaints concern dealing with their lenders, not the loans themselves. Surprised? Yeah, neither are we.

The report, which was issued earlier this month by the CFPB’s Student Loan Ombudsman analyzed customer complaints that were submitted to the agency between September 1, 2016 and August 31, 2017. The agency collected data on federal student loans and private lenders, as well as on student loan servicers, debt collectors, and companies peddling student loan “debt relief.”

The Student Loans Ombudsman report lays out several recurring issues with the servicing of federal and private student loans. For federal loans, these issues include trouble enrolling in income-driven repayment plans and accessing borrower protections including borrower protections aimed at military borrowers and borrowers with permanent disabilities. For private loans, the issues include limited options during times of financial stress, trouble accessing advertised benefits and protections, and problems allocating payment per the borrower’s wishes.

According to the CFPB’s analysis, 71 percent of federal student loan complaints and 61 percent of private loan complains concerned dealing with a lender or loan servicer. The CFPB found that, across both federal and private student loans, a whopping 61 percent of claims concerned the nation’s largest loan servicer, Navient.

If the words “Navient” and “CFPB” ring a bell for you, it’s because the CFPB is currently suing Navient for “systematically and illegally failing borrowers at every stage of repayment.”

In August, Navient’s attempt to have the suit thrown out was denied. And earlier this month the Attorney General for Pennsylvania also filed suit against them.

The CFPB alleges that Navient “created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained.” They also allege that, “through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans.”

But the Student Loans Ombudsman report does contain some good news for consumers. It notes that, since the CFPB started collecting and addressing student complaints in 2011, the actions that it has taken have resulted in over $750 million being returned to student loan borrowers.

The report consists of 12,900 complaints regarding federal student loan servicing, 7,700 complaints regarding private student loans, and approximately 2,300 regarding student debt collection. The CFPB collected approximately 22,000 complaints in total.

For more information on how to deal with student loans, check out these recent articles from the blog:

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