While private student loans carry a small share of the $1 trillion-plus outstanding student debt, they are significant because they represent a disproportionate segment of high-debt borrowers.
Translation: borrowers stuck with private student loans usually owe more than those with federally-subsidized loans.
The U.S. Consumer Financial Protection Bureau this week issued its second snapshot of private student loan complaints. The mid-year 2013 update revealed that most borrowers have issues with trying to re-negotiate loan terms to lower payments in the face of economic hardship.
Nearly three-quarter of all student loan complaints submitted during this period were directed at just eight companies, led by Sallie Mae. This is not surprising since the private student lending and servicing markets are highly concentrated,
“The largest subset of consumers continue to complain that they are unable to modify the repayment terms of their loan, either in order to lower monthly payments during periods of financial hardship or to reflect the borrower’s improved credit profile and creditworthiness,” the CFPB said.
Additionally, consumers raised concerns about a range of other servicing problems, including:
- Payment processing problems;
- Challenges obtaining necessary documentation about their private student loan;
- Difficulty obtaining accurate information about their loan status and repayment options; and
- Obstacles accessing basic account information.
The Dodd-Frank Wall Street reform laws established a “student loan ombudsman” with the CFPB to compile and analyze data on consumer complaints regarding private student loans.
Read the full report.