NerdWallet Study Reveals Student Loan Complaint Epidemic

(Photo: Creative Commons)

(Photo: Creative Commons)

A new study performed by NerdWallet has found that the most common complaints concerning student loan debt includes difficulty when dealing with a lender and the inability to repay a loan.

A system to record complaints dealing with private student loans was first set up in 2011 by the Consumer Financial Protection Bureau, the federal watchdog for consumer financial products and services.  For the study, NerdWallet looked at 5,000 of these complaints that were filed with the bureau last year and made available to the public through the Consumer Complaint Database.

The most common complaint made in 2015 concerning student loan debt was found to deal with difficulty when it came time to communicate with a lender or servicer, with a total of 2,779 complaints.  Lenders and servicers differ in that while a lender owns and issues money to a borrower, a servicer is paid by a lender to manage loan payments.

Within this topic were a number of more specific complaints.  One-third of these related to “trouble with how payments are handled.”  In all, one out of every five complaints suggested that borrowers were given “bad information” pertaining to a loan.  Other specific complaints received included problems with customer service at 17%, issues with fees charged at 14%, receiving multiple phone calls about a loan at 10%, and 9% said they were in need of additional information pertaining to a loan balance or terms of the loan.

The second most common complaint was found to be the inability to pay back a loan, with 1,580 complaints on this subject having been made by consumers in 2015.  Of this group, 43% reported being unable to receive flexible payment options, while another 40% said they were not allowed to reduce their monthly payments.  The remaining 17% said they could not temporarily postpone payments.  Being unable to pay loans can cause borrowers to go into default.  This is especially found within the private student loan market, where default can occur as quickly as 90 days after a missed payment.  Once in default, a borrower can receive a court-ordered judgement which in turn can lead to wage garnishment.

According to MeasureOne, which measures data on private student loans, the number of complaints made in 2015 was considered to be “minimal.”  However, researchers believe this could be due to not many people realizing there is place for them to lodge a complaint.

The goal of the complaint system is to not only record complaints, but to also, when appropriate, find a way to fix the issue.  All complaints are sent by the CFPB to the companies for response.  Individual companies then have 15 days to respond before the complaint is made available to the public.  Although facts alleged within complaints are not verified by the bureau, it does say they “take steps to confirm a commercial relationship between the consumer and the company.”

In total, 97% of complaints received were responded to by companies within the 15-day window.  However, receiving a response does not mean a resolution has been found that satisfies both the company and the customer.