In the years leading up to the financial crisis, many of the same subprime lending practices that led to troubles in the mortgage market also existed in the private student loan market. Like the homeowners who turned to their mortgage servicer to modify their loans but ran into customer service dead ends, lost paperwork and other breakdowns, many private student loan borrowers are looking for a clear path to stay current and avoid default.
Today we’re releasing a new report summarizing complaints from private student loan borrowers about difficulties faced when working with a lender or servicer to avoid default.
While federal student loans have a number of loan modification options to help borrowers avoid default, private student loan servicers and lenders may not make it easy for borrowers to get help in times of distress, which may have consequences for not only your financial future, but also for the broader economy.
For example, our analysis of complaints reveals that many of you tried to find out more information by calling your lender or servicer, but received conflicting or inaccurate information as you were bounced between call center staff. Many of you told us how you were provided no option at all, driving you into default, even though a reduced payment plan might be in the best interest of both you and your lender.
Request for repayment options
After listening to you and to the student loan industry, we’ve developed some advice for borrowers who want accurate information on alternative repayment plans and loan modification options, including a set of instructions that you can consider sending to your private student loan servicer (the company that sends a bill each month).
You can download the sample letter and mail it to your lender or servicer, or you can use the text below to provide instructions using the “Send a Message” or “Contact Us” feature when you log into your account on the servicer’s website.
Although some companies are willing to help borrowers during a time of financial distress, unfortunately, not all private student loan companies offer assistance when consumers are struggling to repay their loans. Using this letter may help you get a clear answer and avoid long hold times and transfers from one call center representative to another.
I am writing to you because I need to reduce my monthly private student loan payment due to a financial hardship. I am requesting a payment that allows me to meet my other necessary living expenses.
Please conduct a review of my account to determine whether I am eligible for an alternative repayment plan.