Student Loan Complaints Increase by 900% as per CFPB’s 2017 Report: California, New York & Florida Lead the List

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For students all over the world, America is one of the top destinations for education that meets today’s industry requirements. However, the cost of this education is high and not all students can easily afford to pay tuition as well as accommodation fees in universities. Thankfully, an option is available that works for both—a student education loan. It looks like a rosy picture, where demand and supply are matching up to each other, but a recent study on the number of cases received by the Consumer Financial Protection Bureau (CFPB) about student loan complaints suggests a totally different picture.

Particularly, the states of California, New York, and Florida have shown a big jump in cases filed by students. Read on to know more about this industry that deals in billions on an annual basis.

The Consumer Financial Protection Bureau is a U.S. government agency that was formed in 2011 as one of the legislative responses to the financial crisis of 2007-2008. The central mission of the CFPB is to make the markets work for Americans when they are applying for a mortgage, selecting a credit card, or any other type of loan. It also tracks complaints filed by consumers about the financial services that they avail. It particularly monitors student loan complaints and the debt collection status across all 50 U.S. states.

In the CFPB’s latest report, California, New York, and Florida have shown a rise of 900% compared to data collected previously.

California, New York & Florida Lead List of Student Loan Complaints Among U.S. States

From the report, here are some excerpts of the data collected for the states of California, New York, and Florida, in particular:

State Total Student Loan Complaints Debt Collection Complaints Change in Volume of Student Loan Complaints Change in Volume of Debt Collection Complaints Total Outstanding Student Debt Loan
California 5,467 1,182 +61% -11% $129.6B
New York 3,764 628 +94% -9% $86.54B
Florida 3,414 815 +75% +6% $76.69B

All three states show a big rise in the volume of student loan and debt collection complaints. The outstanding student loan debt is also significant in number. Based on their web site, the increase in complaints can be attributed to the fact that the CFPB opened up its services to cater to complaints about federal student loan servicing in the year-over-year time period.

Top Issues Identified for Student Loan Complaints in 2017

Drilling down deeper into the data puts forth several reasons for the rise in complaints.

Both federal student loan complaints and private student loan complaints have primarily been categorized into these main areas:

  • Dealing with the vendor or service provider
  • Struggling to repay the loans
  • Problem with credit report or credit score

Of the 12,900 complaints handled by the CFPB, 71% attribute to the first category, 28% are associated with the second category, and only two percent fall into the third category.

Borrowers Are Also Complaining about Problems Accessing Student Loan Protections

The Higher Education Act provides a series of protection measures meant to help students pay back their loans. This includes the ability to make income-driven repayments (IDR), to receive loan discharges in the event of a total and permanent disability, and to be able to consolidate older federal loans to be eligible for specific loan benefits. Even though the Act promises these, borrowers struggle to access these protections due to servicing breakdowns and delays that can deter or deny access to these benefits.

Borrowers Also Continue to Face Problems with Enrolling in the IDR Plans

Most students complained about lost paperwork, unexpected delays, and poor or inconsistent customer service and application processing. Most of the complaints and delays result in increased loan costs, reduced benefits and extended repayments, which result in the borrower paying back more than he/she is supposed to.

Many borrowers face issues when they provide their payment stubs instead of tax returns. The loan providers then either calculate the income inaccurately or the income processing to determine the IDR gets delayed for months as the federal loan providers sit on these files and do nothing—this results in inhibiting the borrowers from making any progress in repaying the loans.

Borrowers Also Complain of Their Loans Being Placed into Forbearance When They Opt for the IDR and Wish to Recertify the IDR

Borrowers are required to recertify their annual incomes manually. The services take months to get the new incomes proofs verified and this ends up with the borrowers paying a different amount than they are required to as a result of their new income and IDR plan.

Navient Continues to Be Responsible for Most Number of Complaints in 2017

Multiple student loan issues in 2017 have been reported against a number of companies, but Navient Corp (NASDAQ:NAVI) tops the list of complaints. It is also the largest handler of federal and private student loans.

The top issues against Navient, according to federal student loan complaints, are about providing incorrect payment information and processing payments incorrectly.

The story is not very different when it comes to private student loan complaints—in addition to the above two commonly reported issues in their case, Navient is also accused of not responding in time or completely failing to act when borrowers complained.

Here is a quick rundown of the number of complaints about the loan servicer as reported in USA Today.

Companies with the Most Number of Federal Student Loan Complaints

  • Navient: 6,274, or 61%
  • AES/PHEAA: 1,517, or 15%
  • Nelnet: 629, or 6%
  • Great Lakes: 340, or 3%
  • ACS Education Services: 192, or 2%

Companies with the Most Number of Private Student Loan Complaints

  • Navient: 4,030, or 61%
  • AES/PHEAA: 414, or 6%
  • SLM Corp.: 362, or 5%
  • Wells Fargo: 303, or 5%
  • Discover Bank: 189, or 3%

In summary, access to good quality education, even with the help of lenders that give out student loans, is a challenging affair. Getting a good quality case officer and finding the right federal or private student loan provider is critical to be able to complete expensive education and not be affected by irregularities and issues of IDR or getting the right benefits and protections that the student borrowers are entitled to.

 

Sources

50 State Snapshot of Student Debt,” Consumer Financial Protection Bureau, last accessed November 6, 2017.

Annual Report of the CFPB Student Loan Ombudsman,” Consumer Financial Protection Bureau, last accessed November 6, 2017.

Student loans: Here are major complaints borrowers reported,” USA Today, last accessed November 6, 2017.

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