In the years leading up to the financial crisis, many of the same subprime lending practices that led to troubles in the mortgage market also existed in the private student loan market. Like the homeowners who turned to their mortgage servicer to modify their loans but ran into customer service dead ends, lost paperwork and other breakdowns, many private student loan borrowers are looking for a clear path to stay current and avoid default.
Today we’re releasing a new report summarizing complaints from private student loan borrowers about difficulties faced when working with a lender or servicer to avoid default.
While federal student loans have a number of loan modification options to help borrowers avoid default, private student loan servicers and lenders may not make it easy for borrowers to get help in times of distress, which may have consequences for not only your financial future, but also for the broader economy.
For example, our analysis of complaints reveals that many of you tried to find out more information by calling your lender or servicer, but received conflicting or inaccurate information as you were bounced between call center staff. Many of you told us how you were provided no option at all, driving you into default, even though a reduced payment plan might be in the best interest of both you and your lender.
Request for repayment options
After listening to you and to the student loan industry, we’ve developed some advice for borrowers who want accurate information on alternative repayment plans and loan modification options, including a set of instructions that you can consider sending to your private student loan servicer (the company that sends a bill each month).
You can download the sample letter and mail it to your lender or servicer, or you can use the text below to provide instructions using the “Send a Message” or “Contact Us” feature when you log into your account on the servicer’s website.
Although some companies are willing to help borrowers during a time of financial distress, unfortunately, not all private student loan companies offer assistance when consumers are struggling to repay their loans. Using this letter may help you get a clear answer and avoid long hold times and transfers from one call center representative to another.
I am writing to you because I need to reduce my monthly private student loan payment due to a financial hardship. I am requesting a payment that allows me to meet my other necessary living expenses.
Please conduct a review of my account to determine whether I am eligible for an alternative repayment plan.
[This paragraph is optional] I believe I can afford to pay $____ per month toward my loan(s). If you require details on my monthly income and expenses, I have attached a worksheet which you can use to make an evaluation.
If you require additional authorization in order to reduce the amount of my monthly payment, please consider this letter a written request that you contact my lender or other authorized party to conduct a review of my account and provide a response within 15 days of receipt of this letter.
If you do not grant this request for a reduced payment plan, I will be at risk of default. If I receive a reduced payment plan, I may be able to avoid default, which is in the best interest of all parties.
If you determine that you are unwilling to provide a reduced payment plan, please provide the following information:
- What available reduced payment options do you offer other than forbearance?
- For what reason(s) am I ineligible for these repayment programs?
- If I am not eligible for these repayment programs, when will I become eligible?
- What steps do I need to take to qualify for these repayment programs?
- Do you anticipate modifying these repayment programs in the future?
- Where on your website can I find additional information on these alternative repayment programs?
In addition, if you are unable to provide any of the information or documentation I have requested or otherwise cannot comply with this request, please provide an explanation.
I hope we will be able to agree upon an acceptable repayment plan.
Thank you for your cooperation.
These instructions may help you get valuable information on repayment options to reduce your monthly payment or to temporarily postpone making payments. You can also download a sample financial worksheet that you can use to determine the maximum amount of money you can put toward student loans.
Some student loan companies have told us that they may ask for recent pay stubs or a bank statement to verify income and expenses. Consider including these documents with your request, which you can mail or send through your private student loan servicer’s website after you login.
We also have other sample letters you can send to your student loan servicer to give payment instructions or request that your co-signer be released and others you can send to a student loan debt collector.
If you’re experiencing a problem with a student loan or debt collection, you can submit a complaint online or call us at (855) 411-2372.
If you have questions about repaying student loans, check out our Repay Student Debt tool to find out how you can tackle your student loan debt.
Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.