Private student loans often confuse and frustrate borrowers: CFPB
As Americans continue to borrow more to pay for college, many are confused and frustrated at the process of dealing with private student loans.
The Consumer Financial Protection Bureau disclosed the depth of the problem Wednesday by publishing nearly 2,000 comments from borrowers, advocacy organizations and other agencies. The federal agency removed names and other identifying information from comments.
Many were angry with lenders for not making terms and conditions clear, such as how to consolidate a series of loans. They also criticized interest rates that typically were higher than those assessed in government loans.
One respondent reported having taken out $130,000 in loans to pay for law school. “I pay $800 in interest each month, which is more than my rent,” the graduate wrote.
The growing cost of a college education has led to an increased reliance on private loans, often to supplement limited government loans for eligible students.
“Not surprisingly, we heard a lot about the challenges borrowers have faced in periods of unemployment and financial hardship,” Rohit Chopra, the CFPB’s student loan ombudsman, wrote in a post on the bureau’s website.
The CFPB has asked state governments, schools and advocacy groups to weigh in on the student debt issue, urging agencies to share any inquiries or complaints from borrowers.
Total outstanding student debt continues to grow. The Federal Reserve Bank of New York said in a report last month that total student loans outstanding had reached $904 billion in the first three months this year, up $30 billion from the previous quarter.
The average cost of a four-year university education increased 15% from 2008 to 2010, according to a recent report by the U.S. Department of Education.
[For the record, 4:20 p.m. June 13: A previous version of this post referred to the comments submitted as “comments and complaints” and said they were submitted through the CFPB student loan complaint system. In fact, the comments were not official complaints, and they were submitted in response to a Federal Register notice issued last winter.]
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