Student Loan Complaints Fewer, But Problems Unresolved: CFPB Report

 November 14, 2019
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Student Loan Complaints

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Borrowers are submitting student loan complaints in smaller numbers, even if they’re still fed up with many of the same old issues. That’s according to the Consumer Financial Protection Bureau’s October 2019 report from its student loan ombudsman.

The report, the seventh in the agency’s history, cataloged about 25,000 federal and private student loan complaints, as well as pointing out the most-criticized lenders and offering recommendations for a better way forward.

CFPB Report by Number of Complaints

  • Federal student loan: 13,900
  • Private student loan: 6,700
  • Student debt collection: 4,600

Student loan complaints are on the decline

Drawing on data from the CFPB’s consumer complaint database, the report catalogs complaints received between September 2017 and August 2019. There was no report issued in 2018, a year that saw the protest resignation of student loan ombudsman Seth Frotman. (Frotman’s position was filled earlier this year with the controversial hire of Robert G. Cameron, a former federal loan servicer executive.)

The chief takeaway of the report was that student loan complaints have fallen in number. In fact, both federal and private loan complaints decreased for the second straight year, coming off their 2016-2017 peak.

Federal loan complaints Private loan complaints
2015 to 2016 2,500 4,100
2016 to 2017 10,200 6,600
2017 to 2018 5,900 3,400
2018 to 2019 5,200 2,500

Cameron, the ombudsman, said in the report that his office wasn’t sure about the reason for the decline, even as the number of student loan borrowers rose during the same period. He added, however, that the findings should lead to additional research.

Federal, private loan complaints highlight same topics as before

Of course, the smaller number of complaints to the CFPB doesn’t mean every borrower’s repayment experience has improved. Thousands of federal and private loan borrowers are still stuck on the same old problems, with complaints about servicers again making up the bulk of grievances.

Subjects of federal student loan complaints

It’s likely here that one complaint type bleeds into another. Dealing with a difficult federal loan servicer, for example, could be related to repayment frustrations. Federal loans, unlike private loans, feature broad repayment protections such as income-driven repayment, yet many borrowers are unaware of their options.

Subjects of private student loan complaints

To receive a private loan, unlike a federal loan, a borrower must have a stable credit history or a creditworthy cosigner. That explains why 1 of 20 private loan complaints are related to the loan application process (and why that’s not even listed as a complaint category for federal loans).

Navient racks up the most student loan complaints

As for the private lenders and federal loan servicers with the most complaints, Navient again found itself topping the list.

Navient, which services both private and federal loans, has been the target of a large segment of borrowers’ criticism over the past two years, including the majority of private loan issues.

Percent of federal loan complaints in 2017-2018 43%
Percent of federal loan complaints in 2018-2019 39%
Percent of private loan complaints in 2017-2018 51%
Percent of private loan complaints in 2018-2019 52%

On the one hand, you could cut Navient some slack here, since it’s one of the largest federal loan servicers, holding $141 billion worth of education debt in repayment, according to our data collection. However, the CFPB found Navient received an outsized amount of criticism, even after accounting for the size of its loan portfolio.

Navient, which was sued by the CFPB in 2017, received the most federal loan complaints per 10,000 borrowers, with 3.9 through 2018, and 3.2 through 2019. The next-most criticized federal loan servicer, Pennsylvania Higher Education Assistance Agency (which operates FedLoan Servicing), checked in at 1.8 complaints per 10,000 borrowers through 2018, and 2.1 through 2019.

Meanwhile, Navient also led the group in debt-collection-related complaints. Specifically, it was the subject of 368 federal debt-collection complaints and 301 private debt-collection complaints, with no other company cracking 150.

CFPB hopes complaints lead to resolutions

The CFPB said in the report that 97% of complaints forwarded to the relevant companies, including loan servicers, receive a prompt reply. But the agency’s ability to protect borrowers has come under question.

For instance, NPR reported in May that the CFPB was having difficulty regulating loan servicers after its data-sharing partnership with the Department of Education was terminated in 2017.

To help resolve complaints — and crack down on shady debt relief companies — ombudsman Cameron concluded the report, in part, by encouraging government agencies to share information more effectively.

But despite the bureaucratic impasse, it could still be worth your while to submit a loan complaint to the CFPB if you’ve run into a problem with your servicer or lender or suffered some other repayment issue. The CFPB could be of help resolving it — and your case might even get highlighted in next year’s report.

Published in News & Policy