Thousands of Borrowers Lodge Complaints Against Private Student Loan Lenders for Poor Customer Service
ByThousands of private loan borrowers are fed up with their providers' apparent inability to fix problems related payment modifications and processing, the Associated Press reported.
The Consumer Financial Protection Bureau (CFPB) compiled a report released Wednesday, spearheaded by the agency's investigator Rohit Chopra. The report documented the more than 3,800 individual complaints against private student loan providers and their poor customer service.
Despite the high amount of complaints, that figure only represents a tiny fraction of everyone who has a federal student loan. According to the CFPB, approximately 13.7 million had outstanding private student loans at the end of 2011.
"The inability of lenders and servicers to initiate alternative repayment plans that would benefit both the creditor and the borrower continues to be a sign that this market functions poorly," read the report.
Private loans took a major hit after the financial market crash in 2008, but many borrowers still have outstanding balances from beforehand. Still, problems many complainants are having with their loan providers seemingly centered around borrowers who wanted to pay off their loans early or in a strategic manner to avoid or lessen the affect of high interest rates.
The CFPB estimated that students who graduated at the time of the market crash had about $40,000 in debt and 80 percent being from private loans. The report also noted it was not surprised by the amount of complaints against Sallie Mae, given its sheer volume of lenders.
Other problems found by Chopra included borrowers being penalized for paying more than what they owed on a given payment and late fees being applied even when the payment was submitted on time. Complainants also said payments made on a smartphone or even through the mail did not always appear in their online statements. Users also reported lost paper checks, lack of accurate payoff information and service interruptions.
Sallie Mae spokeswoman Patricia Christel said 90 percent of its users make payments on time without issue, but they offer loan modification for any customer.
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