New Report Identifies Most Troublesome Private Lenders to Students

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

NJPIRG Law & Policy Center

Trenton – 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 NJPIRG Law & Policy Center.

“The CFPB levels the playing field for private student loan borrowers who may feel at the mercy of their student lender,” said Jen Coleman, Advocate for NJPIRG Law & Policy Center. “Filing a complaint to the complaints database can get real results for consumers.”

Sallie Mae, the student lending giant, generated the most private student loan complaints in New Jersey, and ranked first in every other state. Student loan borrowers in New Jersey carry $25,700 on average in total student loan debt, compared to a national average of $24,803.

“This report brings to light that, with the CFPB, individuals are now empowered to seek oversight over big banks, and those individuals can get results including compensation to resolve their complaints. I’m proud of how far we have come since the 2008 financial crisis in creating the CFPB and creating accountability for big banks and lenders,“ said Congressman Frank Pallone, Jr. (D, NJ-06). “We now have a cop on the beat that is keeping an eye out for individuals, especially those who are using private student loans.”

The report, “Private Loans, Public Complaints: The CFPB’s Consumer Complaints Database Gets Real Results for Student Borrowers,” 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 81 complaints in New Jersey 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 New Jersey was HESAA, the New Jersey Higher Education Student Assistance Authority.  
• New Jersey ranked 9th 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.

Armando Ayala from Teaneck, NJ is a senior at The College of New Jersey, and he applied for a loan through Sallie Mae. “The layout of Sallie Mae’s application prominently displayed variable rates, but made it easy to overlook the more convenient and manageable fixed rate loan. I also made multiple adjustments to the amount of the loan I applied for online, however the application never updated properly –I had to call them each time to validate the changes,” said Ayala. “I wish I’d known about the CFPB’s complaints database so they could have helped me avoid some of these problems.”

The NJPIRG Law & Policy Center 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.

Senator Bob Singer (R-30, Monmouth and Ocean), a member of the Senate Higher Education Committee said “I am very pleased to know the issue of student loans is being scrutinized by the NJPIRG Law and Policy Center. This is a measure that is long over due in my opinion. It is difficult enough for our young people to meet the rising cost of education; they do not need to be concerned about the authenticity or practices of their lending institutions. In a climate where a college degree sometimes does not provide a compensatory wage to cover student loans, it is critical that a watchdog exists.“

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. 

“As a member of the Assembly Higher Education Committee, I firmly believe that the student loan system needs to be reformed and deserves discussion at both the state and federal levels.  Too often, students do not have an accurate picture or adequate financial education to make the best decisions,” said Assemblywoman BettyLou DeCroce (R-26, Essex, Morris, Passaic).  “Transparency in tuition costs and lending processes, as well as incentives for students who work while in school and earn good grades, should be the focus.”

“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,” Coleman said.