To ensure the success of the Consumer Financial Protection Bureau as instrument to assist consumers burdened with student loan debt, the Bureau’s student loan ombudsmen is required to produce an annual report on the subject. That report was recently issued and provides great insight into the biggest concerns of borrowers dealing with a student debt crisis. The report “offers analysis, commentary, and recommendations to address issues reported by consumers in the student loan marketplace.” Let’s see what the CFPB has uncovered.
Overwhelmingly, the most common problems among student loan borrowers are in regard to private student loans and surrounding loan servicing issues in general. Many borrowers reported that their loan repayments had been on time and in good standing, but the lack of availability of loan servicers prevented them from making adjustments to and clarifying the nuances of their repayment plans, causing them to default.
Here’s a list of the ombudsman’s findings of the most prevalent borrower issues:
Responsible Borrowers Stymied
- Inability to speak with personnel empowered to negotiate a repayment plan
- Inability to refinance
- Inability to access repayment plans previously advertised
- “Good faith” partial payments leading to default
- Bankruptcy-triggered defaults
- Unexpected checking account transactions
- Handling of payments
- Confusion when loans and servicing rights are bought and sold
- Crediting of overpayments
- Limited access to account information
- Conflicting instructions
- Difficulty enrolling in incentives
- Barriers to co-signer release
- Payment processing timelines
- Loss of benefits due to servicer personnel-suggested action
Frustration Faced By Struggling Borrowers
- Debt collection practices
- Death of primary borrower
- Disability issues
- Off-hour collection calls and do-not-contact notices
- Accuracy of credit reports
- Forbearance fees
If you are struggling with a student loan issue, you can help facilitate needed change by filing a complaint with the CFPB. Remember, decisions are made by those who show up.
The ombudsmen’s report concludes with three main recommendations to the Senate in hopes of rectifying the uncovered issues. Number one on the list is to “identify opportunities to spur the availability of loan modification and refinance options for student loan borrowers.” The second recommendation stems from the many parallels addressed in the report between the student loan crisis and the mortgage crisis. Accordingly, the ombudsmen’s report advocates “assess[ing] whether efforts to correct problems in mortgage servicing could be applied to improve the quality of student loan servicing.” The final recommendation is to “continue initiatives to increase adoption of the Income-Based Repayment program for federal student loans.”
Of course, those who are indebted by student loans don’t need a report to tell them that student loan management is messy, overly complicated and plagued by inefficiency. Fortunately, there are organizations out there that can help you navigate the turbulent seas of loan optimization.