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Last year, the Consumer Financial Protection Bureau launched an inquiry into the state of the student loan industry by requesting public input on their experience dealing with servicers, lenders and educational institutions. After receiving and analyzing more than 30,000 responses from current and former students across the nation, the agency has released a report detailing its recommendations for reforming the industry.
Since approximately 1 in 4 student loan borrowers are either already in default or having a difficult time trying to repay their loans, the report stresses the need for reform of the entire industry, as well as for more consumer protection rules to be put into place.
One of the biggest complaints from borrowers was the disorganized way in which their loans are handled, with many claiming their lending firm misapplied payments, lost important documents and made clearing up mistakes virtually impossible. People were also frustrated by the fact that they weren’t provided with affordable repayment plans that would allow them to avoid going into default. The CFPB recommended setting a consistent, market-wide standard to eliminate the confusion and make repayment easier for all borrowers.
Another criticism that arose in the inquiry was with regards to the level of customer service that individuals received. Under the CFPB’s recommendations, loan services would be required to provide clear answers to their clients’ questions and to work with them to resolve any issues that may arise. There would also be more information about the performance of service providers available to the public. This would allow borrowers the opportunity to see what repayment plan options a given company offers and how their performance is rated before they sign on for loans rather than after.
The CFPB inquiry found a number of other disturbing trends in the student loan industry, from auto-defaults when a co-signer dies or declares bankruptcy to the obstruction of refinancing options on loans with high interest rates. It’s also fairly common for the transfer of a loan from one servicer to another to result in surprise fees, processing issues and lost account records that can wind up costing the borrower thousands of dollars.
Those who have borrowed money for student loans can get help finding out about repayment options using the CFPB’s Repay Student Debt tool. If you’ve experienced problems with a student loan servicer or debt collector, you can also submit a formal complaint about your experience to the Consumer Financial Protection Bureau.
If you have questions or comments, please chat in the comments below or on the ChallengeStudentDebt Twitter handle.
If you feel you were defrauded by the school you attended or you are being treated poorly as a distressed borrower by your creditors, take the free challenge debt review to find out what options you have regarding your student loans.