Photo: Getty Images/David McNew
Of the 2,857 private student loan complaints that have poured into the Consumer Financial Protection Bureau’s mailbox since March, Sallie Mae has proven the most popular target by far.The private lender was named in just under half of all complaints –– 1,145 in total, according to the CFPB’s latest Ombudsman report.
The only other private lender to come close to that figure was American Education Services, which was named in about 12 per cent of complaints (see a full list below).
A spokesperson from Sallie Mae defended itself in a statement to Pro Publica, arguing that since it is among the largest private student lenders in the nation, it makes sense they would take in more complaints.
“The complaints, the report noted, were not “particularly disproportionate” to each companies’ servicing volume. Sallie Mae has “modified $1.1 billion in private education loans with interest rate reductions or extended repayment since 2009,” said spokeswoman Patricia Christel.
The lender made headlines in the spring when it agreed to forgive $120,000 worth of student loans left to a student’s family after his death. Granted, the move followed a six-year fight by his family and a full-on media blitz. In July, we interviewed Alice Cortes, a Florida mother who claims she was stuck with a $25,000 student loan she never applied for.
To be fair, Sallie Mae’s $1.1 billion is just a fraction of the $150 billion private student loans held in the U.S. Private student lenders as a whole have been blasted for foggy lending practices some activists say contributed to the $1 trillion-plus student loan debt bubble. The CFPB estimates more than 850,000 private student loans are in default, with even more in delinquency.
In reading the list of common complaints cited by student borrowers against lenders, it pretty much mirrors those by homeowners against mortgage servicers over the years.
Here’s where student borrowers are struggling, according to the report:
–Borrowers complain of not being fully informed of the conditions of their loans.
–Some student loan borrowers find that their loans have been sold or their servicer has changed.
–Borrowers report that in some circumstances, if the borrower has not paid his or her student loan on time, the lender might automatically deduct funds from the borrower’s checking account, sometimes also charging an overdraft fee if the account is overdrawn.
–Borrowers state that some lenders and servicers charge a fee for forbearance even though borrowers requesting forbearance typically cannot afford to make their payments – being charged additional fees is not the help they are seeking.