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Student loan complaints up a record 325 percent over last year, says CFPB

Charlene Crowell | NNPA News Wire Columnist | 9/20/2017, 3:15 p.m.

As students and their families begin preparing for another school year, the Consumer Financial Protection Bureau (CFPB) is reporting a record increase over the past year in the number of student loan complaints. The 325-percent increase in complaints includes federal and private student loans, debt collection, and debt relief.

According to Seth Frotman, CFPB assistant director and student loan ombudsman, the growing connections between loans to gain educational credentials and the subsequent debt incurred that must be repaid—often on modest incomes—is a real-life dilemma.

“The public broadly shares the benefits of a highly educated professional workforce serving in their communities,” noted Frotman. “Yet, too often, the financial costs of these new credentials fall on individuals in careers with limited opportunity for wage growth to offset these costs.”

When student loan industry practices that delay, defer, or deny access to critical consumer protections, additional burdens are borne along with the weight of debt owed. Little wonder, then, that consumers have contacted CFPB for assistance.

Over 320 companies have been the source of complaints that CFPB received from March 2016 forward to April 1, 2017. The largest number of complaints, 11,500, concerned federal student loan servicing. Another 7,500 complaints were about private student loans. Issues with debt collection, however, affect both types of loans and generated 2,200 complaints.

Navient, the nation’s largest student loan servicer, is also the leading servicer when it comes to complaints of debt collection concerning both private and federal student loans. Some 63 percent private student loan complainants identified dealing with the servicer or lender as the key issue, compared to nearly half at 34 percent whose problems were based on an inability to pay their loans.

Readers may recall that earlier this year, CFPB sued Navient and two of its subsidiaries for allegedly using shortcuts and deception to cheat 12 million borrowers out of their rights to lower loan repayments. The firm's loan servicing failures caused more than one-in-four borrowers to pay more than $4 billion in interest they should not have been charged from January 2010 to March 2015, according to CFPB's complaint.

Since the litigation is still pending, it does not appear that Navient or other loan servicers have complied completely with the borrower options of Income-Driven Repayment (IDR), or Public Service Loan Forgiveness (PSLF). Both options offer debt relief to student loan borrowers.

PSLF was designed to encourage student loan borrowers into public service careers and in return, receive partial loan forgiveness so long as all of the following four conditions were met:

  1. A qualifying loan;

  2. Enrollment in a qualifying repayment plan;

  3. Qualified public service employment, such as teaching, law enforcement, social work, or public health; and

  4. 120 on-time, qualified loan payments.

What the CFPB report found was that reported servicer problems were preventing borrowers' from obtaining their PSLF benefits. Similarly, student loan borrowers hoping for affordable IDR payments have been frustrated in initial enrollment and subsequent recertification with Navient and four other student loan servicers: ACS, AES/PHEAA, Great Lakes, and Nelnet. Among these five, two—AES/PHEAA and ACS—compiled the most IDR issues by complaints.