WASHINGTON Oct 16 Some private student loan
borrowers who are struggling to repay their debts are facing the
same frustrations with servicers that have plagued mortgage
borrowers, the U.S. consumer agency said in a report released on
These student loan borrowers have complained about being
charged extra fees, being unable to figure out who owns their
loans, and never being able to get a representative who could
assist them on the phone.
They have also experienced improper deductions of payments
from their bank accounts, among other servicing issues, the
Consumer Financial Protection Bureau said.
Similar complaints, common in the mortgage servicing
industry for years, led to a landmark $25 billion settlement
with top banks earlier this year.
The student lending report compiles some 2,900 complaints
the agency has received from March, when it begin accepting
complaints, through September. The 2010 Dodd-Frank financial
regulation overhaul established a student loan ombudsman at the
CFPB to help borrowers with private student loan complaints.
"Graduates don't have a fair chance to pay back their debts
if they are faced with surprises, runarounds, and dead-ends by
student loan servicers," said CFPB Director Richard Cordray.
The report, from the CFPB's student loan ombudsman Rohit
Chopra, recommended that Congress help increase student
borrowers' ability to modify or refinance their loans.
The report also suggested that the CFPB examine whether it
could use ideas from efforts to fix mortgage servicing problems
to address student loan issues.
The vast majority of the new complaints - 95 percent of them
- related to how the loans were serviced, the agency said.
Outstanding student loan debt stands at more than $1
trillion, the agency said.
Private loans don't come with the same protections that
federal loans do, the CFPB said, including options for
income-based repayment plans or discharge of debt upon death.
In July the agency along with the Department of Education
released a report that found that borrowers who took out private
student loans in the run-up to the financial crisis are facing
high levels of default, reflecting the risky lending practices
at the time.