This week, the Consumer Financial Protection Bureau (CFPB) reaffirmed its focus on the problem of intractable student loan debt. On October 16, 2014, the CFPB Student Loan Ombudsman released his Annual Report, which described the number and nature of student loan complaints handled by the CFPB in the preceding year and issued recommendations for the coming year
In his report, the Student Loan Ombudsman indicated that a dramatic year-over-year increase in the number of complaints could be attributed at least in part to the residual effects of borrowing that took place during the financial crisis, but suggested no anticipated natural end to these effects. Specifically, the CFPB handled 5300 private student loan complaints between October 1, 2013 and September 30, 2014, an increase of 38% over the prior period. Of these complaints, 57% pertained to “repaying loan” or “dealing with lender or servicer,” while 41% pertained to “problems when unable to repay loan” or “can’t repay.” Just two percent of complaints pertained to problems obtaining a loan. According to the Student Loan Ombudsman, despite the decline of risky loan origination practices, “many borrowers are still struggling to repay the loans they borrowed during [the years leading up to the financial crisis].”
Also on October 16, the CFPB cited two resources designed to increase student loan borrowers’ ability to advocate for lower monthly payments and to independently budget for loan repayment:
- A sample letter that consumers can personalize, adapt, and send to the servicer of their student loan, requesting modified payment terms and information; and
- A financial worksheet, a budgeting tool that borrowers can use to determine what amount they are able to contribute to student loan repayment each month.
Although these tools represent only a small step toward addressing the most frequent grievances of student loan borrowers, they suggest that the CFPB’s attention to student loan debt is likely to remain a focus in the coming year, particularly as student loan programs under the Higher Education Act come up for reauthorization. Student loan servicers can anticipate discussions about extending to student loan debt servicing certain reforms already applicable to servicing of credit card and mortgage debt.