Student loan borrowers who are in debt to private, non-federal entities are struggling to stay out of default. And when they run into trouble, they get less help with repayment options, compared to borrowers with federally-subsidized loans.
These are the findings of the U.S. Consumer Financial Protection Bureau’s student loan ombudsman Rohit Chopra, who has submitted the latest report on private student loan issues.
The newest report analyzes more than 5,300 private student loan complaints between Oct. 1, 2013 and Sept. 30, 2014, an increase of 38 percent over the previous year.
Many consumers expressed a commitment to repaying their loans, if they could qualify for a payment plan that reflected their current financial circumstances, the CFPB said.
Instead of getting help, these borrowers are being driven to default because no viable repayment options are available to them, the bureau said.
Full Balance Could Become Due
When a consumer defaults on private student loans, the whole balance could become due immediately. This default is then reflected on a consumer’s credit profile.
“It can also negatively affect a consumer’s ability to pass a background check for a job, obtain housing, and impede access to other forms of credit,” the CFPB says.
Many borrowers are unaware of what loan modifications may be available and what the criteria is for qualifying. The information is not readily seen on these lenders’ or servicers’ websites. Many struggling borrowers also reported receiving conflicting or inaccurate information as they were bounced between multiple customer service representatives.
“We are hearing from consumers that they are driven into default because private student loan companies are not providing concrete loan modification options,” said CFPB Director Richard Cordray. “Struggling private student loan borrowers are finding themselves out of luck and out of options. Lenders and servicers must redouble their efforts to deal with these distressed borrowers.”
Click here for the 2014 CFPB Student Loan Ombudsman’s Annual Report.