Bureau Enlists State Attorneys General to Provide Information on Private Student Loan Complaints
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today published close to 2,000 comments from individual consumers about their experiences in the private student loan market. These comments contain unique, detailed, and personal depictions of consumer experiences with private student loan debt.
The public can access these comments at http://1.usa.gov/NamLh9.
“Borrowing for college can be complex and confusing,” said CFPB Director Richard Cordray. “Private student loans provide little room for error and students need to know before they owe. The Bureau is committed to helping students get clear information to make the best choices for their financial futures.”
The consumer comments published today were submitted in response to a Notice and Request for Information published in the Federal Register last winter, asking for input on a study the CFPB and the Department of Education are conducting on private student loans.
Although the comments published today do not represent the full spectrum of experiences, there were a number of common themes that emerged from borrowers who responded to the request:
- Many borrowers report relying on school financial aid offices for information and guidance on which loan products to use. Many borrowers said they sought out their school’s financial aid offices for information about private student loans. Some borrowers said they turned to private loans because they assumed they were ineligible for federal loans. Other borrowers talked about their dissatisfaction with the lack of information available to them.
- Many borrowers struggling in today’s economy are finding their private student loan debt to be unmanageable. Many borrowers revealed that they were despondent or troubled by their inability to fulfill their obligations. Many expressed significant regret about their decisions to pursue a degree.
- Many borrowers report finding it difficult to navigate the repayment process. Respondents articulated a number of issues related to the repayment process. Some challenges included billing and record-keeping issues, lost payments, onerous debt collection practices, and limited flexibility to negotiate repayment plans during times of financial hardship or unemployment.
In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the CFPB to analyze borrower complaints regarding private student loans and make recommendations to Congress and other agencies. Today, the CFPB published an additional Notice and Request for Information in the Federal Register seeking data and information on existing private student loan complaints from state agencies, institutions of higher education, consumer and legal advocates, lenders, and others.
The CFPB also sent a letter to attorneys general and state higher education officials to invite their participation. Responses to the notice will inform the recommendations to Congress in the CFPB’s student loan ombudsman report on private student loan complaints.
Private student loans are financial products used for higher education that are not originated through the federal student loan program. Those active in the private student loan market include banks, credit unions, state agencies, nonprofit organizations, marketers, servicers, and schools. Unlike federal student loans, private student loans do not always include flexible repayment features for borrowers facing hardship.
For consumers who are having trouble with their private student loans, the CFPB launched its student loan complaint system to help consumers deal with their lenders and servicers. Consumers can file complaints about any kind of student loan. While the CFPB will primarily manage the private student loan complaints, the CFPB works closely with the Department of Education to route complaints that fall under their purview as the overseer of federal student loans.
The CFPB has been actively pursuing a number of other initiatives to assist borrowers of student loans, including:
- Releasing web tools like the Student Debt Repayment Assistant and the beta version of a financial aid comparison tool;
- Conducting an in-depth study of the private student loan marketplace, revealing that there is over $1 trillion in outstanding student loan debt;
- Collaborating with the Department of Education to develop the draft Know Before You Owe Financial Aid Shopping Sheet.