The CFPB helps monitor the worst loan servicing companies
Reviewed by Andy SmithFact checked by Vikki VelasquezReviewed by Andy SmithFact checked by Vikki Velasquez
In 2023, the United States had 43.4 million student loan borrowers who owed $1.765 trillion, making it one of the highest types of consumer debt, second only to mortgage loans. The Consumer Financial Protection Bureau (CFPB) monitors complaints on debt servicing companies and helps applicants choose providers that will help them with their cost of education.
Key Takeaways
- A student loan is a debt used to pay for education-related expenses.
- The Consumer Financial Protection Bureau compiles an annual list of consumer complaints received by student loan providers.
- Navient was the lender with the most complaints about private student loans.
- AES/PHEAA was the lender with the most complaints about federal student loans.
Paying for Education
While some students can afford to pay education costs upfront, plan by opening a college savings plan, or work through school to pay tuition fees and expenses, many opt for student loans. A student loan is a type of debt individuals take out to help pay for the costs associated with higher education. This includes undergraduate and graduate studies, doctorates, and medical and dental school.
Student loans can be used to pay for tuition, housing, fees, and other related expenses. Loans fall into two different categories: federal and private. The U.S. Department of Education administers federal student loans. Qualifying commonly depends on a student’s financial snapshot and requires an application called the Free Application for Federal Student Aid (FAFSA).
Loan eligibility and approval are based on personal circumstances and financial information for applicants and their families. Private loans are issued by private lenders such as banks, credit unions, and other financial institutions. While federal loans are based on financial need and merit, private loans may rely on credit history. Interest rates also differ between the two. While federal loans tend to have lower rates, private lenders often charge borrowers much higher rates.
Important
Federal student loans tallied $1.634 trillion in Q3 2023, with the average balance equal to $37,645.
CFPB Report
The Consumer Financial Protection Bureau collects complaints about financial products and services. These complaints are compiled in a database, published, and sent to companies and providers. Data is divided by product and service, and consumers may access it.
Student loan complaints are filtered through an ombudsman who helps provide borrowers with assistance. These complaints are compiled into a report published by the agency annually for:
- The U.S. Secretary of the Treasury
- The U.S. Secretary of Education
- The CFPB’s director
The tenth annual report was published in October 2022. The information compiled into the report was collected between Sept.1, 2021, and Aug. 31, 2022. Of 8,407 complaints, 5,445 (65%) were related to federal loan providers, while 2,962 (35%) were with private loan providers.
Student Loan Complaints
Consumers identified the following issues as the most troublesome when it came to their student loan providers:
- Dealing with lenders or suppliers: The main complaint under this category was that people said they received inaccurate information about their loans. This was followed by trouble with how payments are handled. The third complaint was problems dealing with customer service.
- Difficulties repaying student loans: The main complaint under this section is that borrowers feel they can’t get flexible repayment options. The second most common complaint under this category was that lenders didn’t allow borrowers to temporarily delay payments. The third category was problems borrowers encountered trying to lower their monthly payments.
- Problems related to borrowers’ credit reports or scores: Borrowers complained about incorrect account statuses. The second largest complaint was that lenders didn’t fix errors on the borrowers’ credit reports. The third-largest complaint was about incorrect account information.
| Company Name | Number of Complaints |
| Navient | 761 |
| SLM Corporation | 272 |
| Nelnet | 229 |
| AES/PHEAA | 138 |
| Discover Bank | 69 |
Borrowers can submit a complaint about a student loan or other financial product/service directly to the CFPB through its website.
| Company Name | Number of Complaints |
| AES/PHEAA | 1,486 |
| Navient | 771 |
| Nelnet | 611 |
| Maximus Education | 391 |
| MOHELA | 118 |
Some borrowers can have federal student loans forgiven, canceled, or discharged. Information is available on the website for Federal Student Aid.
Loan Forgiveness and Assistance
In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act gave borrowers of certain federal student loans temporary payment relief, which expired in 2023. Payments resumed in October 2023.
The Biden Administration had hoped to forgive up to $20,000 of student debt for some borrowers. However, this plan was struck down by the Supreme Court in 2022. The Department of Education offers programs such as the Saving on a Valuable Education (SAVE) plan to help reduce the amount borrowers have to pay on their loans.
Important
On July 18, 2024, a federal court blocked the operation of the Saving on a Valuable Education (SAVE) Plan until court cases centered around the Income-Driven Repayment (IDR) plan can be resolved. In the meantime, the Department of Education has moved borrowers enrolled in the SAVE plan into forbearance, whereby they will not need to make payments, nor will interest accrue on their loans.
Options exist for borrowers nearing Public Service Loan Forgiveness (PSLF). Borrowers can “buy back” months of PSLF credit if they reach 120 months of payments while in forbearance or switch to a different IDR plan.
Can Borrowers Sue a Student Loan Servicer?
In general, borrowers can sue a student loan servicer. If there is a class-action lawsuit against a provider or school, borrowers automatically become a part of the class-action lawsuit but are not directly suing any party. If the lawsuit is determined in favor of the suing party, then borrowers will share in the awarded amount.
How Do Borrowers File a Complaint Regarding Student Loans?
The best place to start is by filing a complaint with the student loan provider, either by phone, online, or email. Borrowers can also file a complaint with the Consumer Financial Protection Bureau and the U.S. Department of Education.
What Organization Oversees Student Loans?
The organization that oversees federal student loans is the Office of Federal Student Aid. Private student loans are overseen by the private lender that issued the loan.
The Bottom Line
Borrowers can research complaints filed against their student loan providers at the Consumer Financial Protection Bureau. Those applying for loans may find this data helpful when choosing a loan provider.
Read the original article on Investopedia.