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New LendEDU Report Fills Void of Unpublished CFPB Data on Student Loan Complaints

Since Seth Frotman tendered his resignation from the Consumer Financial Protection Bureau (CFPB) back in August, the CFPB has faced criticism for failing to release the 2018 annual report of its Student Loan Ombudsman, the first time it has failed to do so since 2012.

Now, in the absence of this federal publication, LendEDU has stepped in to replicate the CFPB’s student loan consumer complaint report, compiling loan grievances made in 2018 from CFPB’s complaint database and conducting a data analysis of its own.

Under the Dodd-Frank Act, the Ombudsman is required to produce an annual report “that describes the activities, and evaluates the effectiveness of the Ombudsman during the preceding year.”

By withholding the report, critics of CFPB claim that ongoing hardships faced by student-loan borrowers have a greater chance of being overlooked by the federal government.

“The fact it’s not come out means that there are problems that are not being addressed,” Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, told MarketWatch.

However, as LendEDU’s 2018 CFPB Student Loan Complaints Report highlights, just because CFPB failed to publish the report does not mean that student-loan borrowers have stopped submitting complaints.

Between January 1, 2018 and December 19, 2018, 8,340 student-loan specific complaints were submitted to the CFPB. After analyzing each complaint individually, LendEDU uncovered a number of different student loan servicing trends.

Out of the total number of complaints submitted, 64 percent pertained to federal student loans, while 36 percent pertained to private loans. In relation to the U.S. population as a whole, that comes out to 26 student-loan specific complaints per one million U.S. residents.

The report first examines complaints against federal student loan servicers, those that act as intermediaries between student borrowers and the federal government, handling billing, repayment processes and other services required by the Department of Education.

In terms of complaints filed against these federal servicers, LendEDU found that Navient led the way in volume, representing 42 percent of the total number of complaints received.

Furthermore, when adjusted for each servicer’s federal loan portfolio to account for the differing sizes of their borrower bases, Navient had the highest rate of complaints per million loan recipients, 336.19, almost double the amount of the next closest company, AES/PHEAA with 170.4.

The report then shifts to examining the private student loan industry, which differs from the federal one in that private loans are funded by banks, credit unions or specialty lenders as opposed to the federal government.

When looking at complaints submitted about private student loan lenders, Navient again ranked first, representing 53 percent of all complaints, followed by AES/PHEAA with only eight percent.

Among both federal and private student loan lenders, LendEDU uncovered that the most common loan issues borrowers reported involved dealing with lenders or servicers, struggling to repay their loans, facing problems with their credit report or credit score, or not being approved for a loan in the first place.

The report wraps up by examining student loan complaints on a state level. In this area, LendEDU found that Navient was the most complained about company in 46 states, and that larger states such as California, New York, Pennsylvania and Texas with more postsecondary institutions tended to receive the most complaints.

Bringing attention to these patterns can lead to help for borrowers. As documented in last year’s CFPB Student Loan Ombudsman report, in 2017, the collected complaints “led to actions that have collectively returned more than $750 million to student loan borrowers.”

With no other report currently in existence to represent the student loan industry in 2018, LendEDU’s work highlights how the nation’s student loan problem extends past rising college costs and how the conversation could be broadened to include loan servicing standards.

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