An annual report released yesterday by the Consumer Financial Protection Bureau’s education loan ombudsman notes that three out of every four complaints filed by consumers about student loans had to do with how those loans are being serviced and collected, and references “coercive debt collection practices” related to the collection of private student loans as one of the key risks and challenges impacting individuals with federal student loans.
A copy of the report can be accessed by clicking here.
The report analyzed student loan complaints submitted by consumers to the CFPB between September 2022 and August 2023. It’s probably worth mentioning that there was a moratorium in place on collecting certain federal student loans during this period as part of the government’s response to the COVID-19 pandemic. The report notes that about three out of every four complaints filed by consumers during this period in regards to student loans were about how those loans were serviced and collected, and that the number of complaints has risen in recent years.
Some of the complaints filed by consumers reported wait times of nearly 16 hours to get in touch with a customer service representative, monthly payment amounts that varied by as much as $3,000, and refusals to provide access to debt forgiveness products that consumers were entitled to under the law. Many of the types of complaints filed by consumers were the same that the CFPB has seen for a number of years, the ombudsman noted.
Noting that schools have not been subject to the same standards as other financial institutions when it comes to their debt collection practices, the report noted that the CFPB is “concerned” about the borrower experience with institutional loans offered because of past instances where schools engaged in “strong-arm debt collection practices.”
Among the recommendations made by the report are:
- Ensuring that federal student loan borrowers can access all protections intended for them under the law
- Ensuring that loan holders and servicers of private student loans do not collect debt where it may no longer be legally owed or where the debt was previously discharged
- Using consumer complaints to develop policies and procedures when they reveal systematic problems
