New Report Identifies Most Troublesome Private Lenders to Students

Florida Students Resolve Lending Disputes Through the CFPB’s Public Consumer Complaints Database

Florida PIRG

Thousands of American students are using the Consumer Financial Protection Bureau’s (CFPB) public Consumer Complaints Database to settle disputes about private student loans, according to a new report from the Florida PIRG Education Fund.

Sallie Mae, the student lending giant, generated the most private student loan complaints in Florida, and ranked first in every other state. Student loan borrowers in Florida carry $25,600 on average in total student loan debt.

“The CFPB levels the playing field for private student loan borrowers who may feel at the mercy of their student lender,” said Dalyn Houser, Program Associate for the Florida PIRG Education Fund. “Filing a complaint to the complaints database can get real results for consumers.”

The report, “Private Loans, Public Complaints: The CFPB’s Consumer Complaints Database Gets Real Results for Student Borrowers,” [Private Loans, Public Complaint Reports] is the second in a series that analyzes the data in the CFPB’s Consumer Complaints Database, which accepts complaints relating to a variety of financial products and services. This report focuses on complaints about private student loans, which are the riskiest and most expensive way to pay for a college education. Private student loans make up just 15% of the student loan market. However, student loan borrowers with more than $40,000 in total debt disproportionately carry private student loans. 

Some key findings:

• The CFPB has helped enable more than 330 consumers, or about eight percent of the total complaints filed, to receive monetary compensation to resolve their student loan complaints, with a median of $700 in monetary relief, and maximum relief of more than $75,000.   More than 500 additional consumers, or twelve percent of the total complaints filed, have had their complaints closed with some form of non-monetary relief, such as modifying collections proceedings and providing assistance with documentation.

• The most complained-about lender in every state was Sallie Mae, which generated 127 complaints in Florida alone. Nationally, Sallie Mae generated 46 percent of complaints about private student loans in the database. It dominates the private student lending market with an estimated 50 percent market share.

• After Sallie Mae, the lender that generated the most complaints in Florida was AES/PHEAA. 

• Florida ranked 16th nationally in how likely borrowers in the state were to complain about their private student loans. Overall, borrowers in the Northeast were much more likely to file a complaint.

• Borrowers were most likely to complain about problems with repaying their loan, as issues with fees, billing, deferment, forbearance, fraud and credit reporting accounted for 65% of complaints.

Mr. Rick Wilder, Director of the University of Florida Student Financial Affairs states, “Students should do their research on the past performance of any private lender they might be considering prior to borrowing money from them.”

This is explained in further detail by the Stetson University Student Aid Office, “We generally encourage students to go for the federal student loans because they have better interest rates and tend to leave students with less debt after they graduate.  For graduate students, it is much harder to receive federal loans to help pay for schooling, so you see them more often reaching out for private student loans.  Also, some students in their third or fourth years in college shoot for private student loans over federal ones.”

A junior at Florida State University, Danielle Pinto, can take it rather personally, “I receive the loans from Sallie Mae. I need private loans to compensate for the gap in funds. I don’t necessarily like them because the interest rates are so high nowadays but they’re necessary for me to pay for schooling.”

The Florida PIRG Education Fund report comes just after the CFPB student loan ombudsman released its annual report last week on the private student loan marketplace which provides a more qualitative look at the complaints.

The report also highlights several changes that the CFPB should make to the public database, such as adding individual complaint narratives in order to share richer details about the problems private student loan borrowers are facing, in order to further help student consumers who may be considering taking on a private student loan. The report praises the CFPB for analyzing the complaints data on a regular basis to spot trends and to take action, and urges the bureau to do even more in the arena of aggregating data and taking regulatory action.

“The CFPB is making it possible for private student loan borrowers and other financial consumers to make it right when they’ve been wronged by their lender,” Houser said.

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Download the report, “Private Loans, Public Complaints: The CFPB’s Consumer Complaints Database Gets Real Results for Student Borrowers” [Private Loans, Public Complaint Reports]

This is the second in a series of five reports by the FLPIRG Education Fund that analyze the complaints in the CFPB’s public Consumer Complaints Database. Upcoming reports will analyze complaints relating to credit reporting, credit cards, and debt collection.

Visit the CFPB’s public Consumer Complaints Database: www.consumerfinance.gov/complaintdatabase/

FLPIRG Education Fund works to protect consumers and promote good government. We investigate problems, craft solutions, educate the public, and offer meaningful opportunities for civic participation. www.flpirgedfund.org