As the country’s student debt climbs to over $1 trillion, borrowers nationwide struggle with dead ends, loan defaults and benefits, according to a new report by the Consumer Financial Protection Bureau.
Rohit Chopra, a student loan ombudsman with the Consumer Financial Protection Bureau, released details on a student loan ombudsman report in a press call on Monday, detailing complaints from loan borrowers nationwide.
“I think that the issue inventory will actually help industry with how they might address the customer service issues to make sure consumers are protected and laws are being followed,” Chopra said in a conference call with the press.
The report aggregates complaints from people with under a $1,000 in debt to more than $80,000, he said.
Since the report’s launch in March, borrowers have filed 3,000 complaints, 95 percent of which were related to servicing and collection, Chopra said.
Many of the complainants, who are mostly ages 22 to 29, graduated in a tough economy and are struggling to pay their federal student loans, Chopra said.
“The lender may be better off negotiating a payment plan the borrower can afford,” Chopra said. “Sometimes servicers cannot make those deals efficiently.”
The report will reach the Secretary of the Treasury, the Secretary of Education and Congress on Tuesday.
The CFPB published suggestions for Congress on how to deal with the quality of loan disclosure agreements and customer service tips for private and public lenders.
Although students nationwide struggle with growing debt, Congress has implemented some legislation aimed at ensuring prudent financial decisions by college students.
The 2008 Higher Education Opportunity Act allows students to weigh the cost of college after financial aid is given. Students have the ability to withdraw after being accepted in case financial aid is insufficient.
The Higher Education Opportunity Act also requires schools to disclose information about the fairest, most beneficial moneylenders.
But student debt is still growing fast.
The country passed the $1 trillion threshold in student debt in May. More than 850,000 private loans are in default and even more in delinquency.
“We have heard from borrowers that have said that they cannot always get a straight answer and face surprises, runarounds and dead ends,” Chopra said. “We also heard from borrowers that access payments were accredited to loans with the lowest interest rate instead of the highest rate.”
Many student loan borrowers discussed how difficult it is for them to take advantage of the benefits given to them by law, Chopra said.
The complaints that were filed seem to be the last input from people who have been searching for help for years, Chopra said.
“We heard from a borrower paying on time and doing everything agreed on in the contract,” Chopra said. “The cosigner, the parent, filed for bankruptcy, but because of a term in the loan note, their loan went into default.”
Some Boston University students with loans said they were not completely aware of all that accompanied a loan.
Evelyn Ling, a junior in the School of Management, said she took both government and private student loans out to pay for school.
“I don’t really know how the paying process works,” Ling said. “They don’t really tell you. It just says you are paying after graduation, but it doesn’t say where you should go to do all these things.”
Ling said because she does not have to pay right now, her parents inform her about her loans.
“My mom gets the letters and then she’s telling me things, and it’s [the loan is] piling up a lot faster than I thought,” she said. “I didn’t know it would accrue interest that fast.”
Mary Froehlich, a junior in the College of Arts and Sciences, said she does not have to worry about paying her loans, although they are issued for a high amount.
“I took my loans out through private companies,” she said. “My parents are paying for my loans.”
Mariah Bailey, a sophomore in the College of General Studies, said she had to take her first student loan out this year from the private company Sallie Mae.
“I did a lot of research, because I don’t want to be stuck with something like this and then just be up to my neck in debt when I graduate,” Bailey said.
Bailey said she picked to have a fixed interest rate on her loans, so that there was no chance her interest rate could waver up.
“I think student loans can stink when companies aren’t very straightforward with how they are going to deal with the students after graduation,” she said.
Bailey said that while she has already started paying off her loans, her parents have reminded her several times to be responsible for her loans.
“My mother is a cosigner,” she said, “and she told me she’s not getting stuck with anything and that I have to be on top of it.”
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