It’s no secret student loan borrowers in the US have it rough. One in four of the the country’s 44 million student loan holders are struggling to make payments or in default. The average American borrower graduates college owing around $34,000 and can expect to spend the next 21 years paying it off.
Student debtors can also run into problems with loan servicers. These are private businesses and organizations who manage the government loans of current and former college students.
The Consumer Finance Protection Bureau (CFPB) complaints database is a gauge of the issues these borrowers have. Tens of thousands of student loan holders have complained to the bureau since the CFPB’s website first let customers of financial businesses submit in December 2011.
But it was only in February 2016 the watchdog began taking complaints on federal loans, the government loans more than 95% of student loan debtors have. Complaints from student borrowers nearly doubled from the previous year after the CFPB was no longer just reviewing non-federal loans.
Last year, the bureau added more issues student loan holders could report, such as loans lowering credit scores. This makes 2017 the most representative year for student loan complaints yet.
Five issues took 78% of complaints last year. Borrowers either complained payments were mishandled; they received bad information; had problems or couldn’t reduce payments; couldn’t get flexible payments; or didn’t agree with fees charged.
Federal student loans drew 62% of all complaints. In the second top category, “received bad information,” more than seven out of ten borrowers had federal loans. The issue had more federal loan complaints than any other category.
While offering online advice, sample letters and forms for student loan holders, the CFPB works to get a “timely response” from a company within 15 days of a complaint. Student loan servicers and lenders replied to 99% of complaints within 15 days last year.
But only a small fraction of debtors got a favorable outcome.
More than nine out of ten cases “closed with explanation” from the company without any kind of compensation, while only slightly more than one out of one hundred cases “closed with monetary relief” for the borrower. Another four out of one hundred cases “closed with non-monetary relief,” which means the debtor received an outcome not directly involving money, such as how their terms were handled.
When the CFPB publicly launched the complaints database in 2012, the bureau said they would prioritize the “review and investigation [of] complaints in which the consumer disputes the response.” The CFPB eventually stopped asking consumers if they disputed the company’s response in April 2017.
More than eight out of ten borrowers didn’t dispute the results of their complaints:
Persis Yu, an attorney at the National Consumer Law Center Student Loan Borrower Assistance Project, has advocated for student loan borrowers for nine years. She said the data show how borrowers can feel powerless in the federal loan system.
“I think a lot of folks don’t feel empowered to complain,” Yu said. “And then when they do complain and then they are told, ‘This is the best we can do,’ a lot of people don’t feel empowered to complain to the next level.”
President Donald Trump appointed White House budget director Mick Mulvaney as interim director of the CFPB in late Nov. 2017. Mulvaney supported a bill to eliminate the CFPB when he served in Congress, and as the agency’s leader, he has so far requested zero funding for 2018.
In an bureau-wide letter the New York Times reviewed, Mulvaney suggested the watchdog would only pursue issues and companies with abundant complaints. Student loans made up just 7% of the CFPB’s nearly 240,000 complaints in 2017.
When asked if student loans remained an area of focus in light of Mulvaney’s letter, CFPB spokesman David Mayorga said “we will decline to comment on confidential enforcement and supervision activities.”
That’s not to say the CFPB isn’t taking action on student loan complaints.
An Oct. 2017 CFPB report said complaints helped win more than $750 million in debt relief for student borrowers by driving new government regulations. The changes include requiring automatic interest-rate reductions and eliminating “surprise auto defaults” from new private loan contracts.
“When borrowers are empowered to stand up for themselves, they can shape policy and spur government to take action,” said CFPB student loan ombudsman Seth Frotman in a statement that month.
The CFPB has also used the complaints to backup lawsuits its filed against student loan lenders such as Navient Solutions.
Navient Solutions, formerly Sallie Mae, earned 64% of the nearly 17,000 student loan complaints the CFPB gathered in 2017.
The Delaware-based company is the largest student loan servicer in the US. Half of Navient’s 12 million debtors fall under its contract to collect student loan payments for the US Department of Education.
Complaints against Navient spiked nearly 300% in 2017 from the previous year. The explosion in complaints came after the CFPB hit the financier with a widely covered, potentially multi-billion dollar lawsuit in Jan. 2017, accusing them of “providing bad information, processing payments incorrectly, and failing to act when borrowers complained.”
Navient added $4 billion in interest rate charges between January 2010 and March 2015. The CFPB argues these charges could have been avoided if the company had told struggling federal loan borrowers of their rights to income-driven repayment plans, which are plans many borrowers are eligible for.
In March 2017, Navient asked the court to dismiss the case on the grounds they weren’t required to provide financial advice, Bloomberg reported.
“There is no expectation that the servicer will act in the interests of the consumer,” said Navient in its court filing.
US District Court judge Robert D. Mariani rejected the motion in Aug. 2017, ruling Navient could be tried under the Consumer Finance Protection Act for committing deceptive practices.
Persis Yu of the National Consumer Law Center said she couldn’t comment on the legal specifics of the lawsuit but did call Navient’s defense “outrageous.”
“The experience of the borrowers described in the Navient lawsuit is very similar to the borrowers that we’ve worked with. We think it’s a very important lawsuit that’s happening.” Yu said, ”Although, I think it’s not limited to Navient. I think many of the other servicers engage in the same behavior.”
The CFPB declined to comment on the pending litigation. On the other hand, Navient denies any wrongdoing. Navient says half of their federal borrowers are enrolled in income-driven repayment plans and are 31% less likely to default than those with other servicers.
Navient spokeswoman Patricia Christel said their research found 90% of the CFPB complaints were caused by federal loan policies out of their hands or “disagreements with loan terms that were set at the time the loan was made.”
“We have recommended policy changes that would allow servicers to offer a courtesy credit bureau retraction, a private loan rehabilitation program and simplified federal income-driven repayment enrollment process,” Christel said in an email.
“These are common sense changes that would benefit borrowers and the economy,” she added.
The US Department of Education enforces loan policies and offers subsidized federal loans through its Free Application for Federal Student Aid (FAFSA) program. FAFSA reported 42.3 million active borrowers in Q2 2017.
Education secretary Betsy DeVos, who took office Feb. 2017, said student debt was “of grave concern” at a June 2017 Senate Appropriations Committee hearing on the department’s budget.
Student loan borrowers owe $1.3 trillion in outstanding debt, and more than one out of ten borrowers are 90 days behind on their payments, according to an April 2017 report by the New York Federal Reserve. Student loans account for one-tenth of all debt held by American households and come in second after mortgage debt.
The Trump administration has proposed slashing student aid by $143 billion over the next decade and replacing today’s four federal income-driven repayment plans with one plan, in the hopes of creating a less confusing enrollment process. The Education Department has also said they want to select one servicer to replace the current nine servicers, to manage all federal loans starting in 2019.
The US Department of Education didn’t respond to multiple emails and phone calls requesting comment on the federal loan complaints, Navient’s policy suggestions, or if they would consider the complaints when selecting the single loan servicer.
Consumer advocate Ashley Norwood of the non-profit American Student Assistance said federal regulations were the cause of many disputes between servicers and customers. Her organization spoke with roughly 85,000 borrowers seeking help via phone, web chat, and email last year.
“You have to get it outlined how the [federal] plan is. There’s no flexibility,” she said. “Whereas you might be able to work something out with a private lender because they aren’t regulated.”
But Norwood said not to rule out incidents where debtors get bad information, which was the number one issue federal loan borrowers complained about in 2017.
“There may be cases where they are not explaining things well enough to the borrower so they understand why they are getting a ‘no’ or why their payment is such,” Norwood said.
“If I have a regular conversation with a borrower it’s going to take at least 45 minutes to go through everything,” she added.
So what steps can student debtors take to prevent problems with servicers?
“If I had any advice for student loan borrowers that are entering into payments for the very first time: They need to do their homework,” Norwood said.
The choices can be dizzying. To name a few, there are four different income-driven repayment plans, limits on postponing payments and job agency requirements for unemployment deferments.
If you still don’t understand the rules or the problems with your servicer: Get help from a neutral third party.
“But never, ever, ever pay for that help,” Norwood said.