Alert October 16, 2012

CFPB Releases Report on Private Student Loans

The CFPB’s Student Loan Ombudsman released its annual report on private student loans and a factsheet about the report. The report identifies complaints made by private student loan borrowers (e.g., loan origination or servicing).  The CFPB Ombudsman noted that many of the complaints parallel to those heard about mortgage loan servicers, such as “servicing surprises” (e.g., bankruptcy-triggered defaults, application of payments, and limited access to account information); repayment frustrations (e.g., the tactics used by private student loan debt collectors, disability issues and accuracy of credit reports); and few repayment options. The report also detailed other challenges private student loan borrowers face, including protections under the Servicemembers Civil Relief Act, for-profit college-affiliated loans, and overall confusion between private and federal student loans.

The report recommended that Congress identify opportunities to facilitate student loan modification and refinance options for borrowers.  The report also made two recommendations to the CFPB and the Secretaries of the Treasury and Education: (1) validate the existence of any systematic issues in the student loan servicing market and determine whether any additional guidelines are needed, and (2) work with non-profit organizations to increase awareness of income-based repayment and other repayment options.