Thousands of borrowers have told us their stories on how they manage tough times with their student loans. Some students ended up borrowing much more than they expected in order to complete their degree, often because a parent lost a job in the midst of the financial crisis. Others had a tough time finding a job after graduation, making student loan payments difficult to afford.
Many borrowers have found help through income-driven repayment plans, where your payment is capped as a portion of your income. In the past year, more than one million student loan borrowers signed up for income-driven repayment plans on their Federal Direct student loans – an increase of 64 percent.
Too many private student loan borrowers are trapped
The private student loan market boomed in the years leading up to the financial crisis, where many lenders aggressively marketed loans and quickly sold them to investors. While these practices have subsided, too many borrowers with these loans find themselves out of luck and out of options. Unlike federal loans, most borrowers with private student loans don’t have flexible repayment options when they run into trouble. They report receiving very little information or help when they get in trouble, that there are no affordable loan modification options available, and that the alternatives to default are temporary at best.
Last year, Director Richard Cordray and Education Secretary Arne Duncan, along with senior officials from across the government, brought together the nation’s largest student lenders and servicers. We urged them to develop more options to help borrowers avoid default and increase the likelihood of full repayment.
Will student lenders and servicers make a deal?
Today, we’re asking several players in the student loan industry to find out what progress they’ve made. We’re looking to find out what loan modification options lenders and servicers provide, how customers can learn about their repayment options, and how borrowers can get approved. This effort also complements the work of the CFPB and our other regulators to help prevent repayment problems for future borrowers.
Borrowers across the country have told us that they aren’t looking to get off the hook, they just need a payment plan that they can afford. One borrower told us:
“I have no options left in regard to lowering my payment, forbearance, deferment or delaying my payments. I work full time as a teacher, but my student loan payment is more than a third of my income. My
[specialty student loan company] just told me that there is nothing I can do but let my private loans go into default and to try to work something out with the collections agency. I have no qualms about paying a monthly fee that I can afford, but currently the money just does not exist.”But many consumers have asked why their private student lenders won’t make a deal. After all, if lenders and servicers offered lower payments during a tough time, borrowers could avoid default and lenders could get fully repaid over the long run – a “win-win” for all.
In addition, several industry players have shared with us that they are willing to make deals with borrowers and will be launching new programs. But even today, many borrowers still have questions about these new repayment plans: What are the options? How do I enroll? Will other lenders offer similar repayment options?
The inquiry we are launching today can help us get to the bottom of these questions. Here’s an example of the information request that we’re issuing.
If you need student loan help today
If you’re in trouble today, check out our advice for borrowers. You can find a sample letter you can send to your student loan servicer to help get clear options – if they exist – on how to avoid default.
To learn more about other options when repaying private and federal student loans, check out Repay Student Debt. If you still need help resolving a student loan issue, like a surprise default or a payment processing mistake, submit a complaint.
When we hear back from the student loan industry on their efforts, we’ll be sure to update you.
Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.
Continue Reading
Today, we’re releasing our third Snapshot of Complaints Received from Servicemembers, Veterans and their Families. The report details the data and trends from consumer complaints we’ve received from members of the military community since July 2011.
Here are just a few highlights:
- Debt collection complaints have continued to rise since our last report, and now make up 39 percent of total complaints. It is our largest category of complaints from the military community.
- Credit reporting remains a top category of concern. 72 percent of these complaints are about incorrect information on credit reports. This remains a significant issue for the military community, one that we highlighted earlier this year.
- Student loans are another concern. 49 percent of these complaints are about problems dealing with a lender or servicer. In these complaints, we continue to see long-standing trends, such as servicemembers complaining about not being provided their Servicemembers Civil Relief Act rights.
This year our report also highlights our outreach efforts that allowed us to connect with thousands of members of the military community, as well as three of our enforcement actions that recovered millions of dollars for affected consumers, primarily servicemembers, veterans, and their families. These figures represent the positive impact of the work we continue to do on behalf of those who serve.
Problems with account services
Basic account servicing stands out as a significant area of concern for servicemembers. Most consumers can call their financial institution, visit a branch, or connect online to try and get the help they need to maintain their account. Unfortunately, for military personnel and their families, the realities of military life, including deployments, frequent moves, and a high operational tempo, can sometimes make access to those services extremely challenging.
We found that servicemembers were often subject to a variety of account maintenance or penalty fees, as well as account-access restrictions, which were triggered due to aspects of their military service.
These problems raise concerns that financial institutions may not have a true understanding of the servicing needs of their military customers and may lack proper procedures and protections for them. Detailed examples of servicemember experiences can be found in Section II of the report.
Check out the snapshot to learn more.
We’re listening
As always, if you have a problem with a consumer financial product that you can’t resolve on your own; or if you know someone in that situation, please remember that you can submit a complaint online or by calling (855) 411-2372. We make your voice heard.
