There are more than 43 million student loan borrowers in the United States, making it one of the largest types of consumer debt—only second to mortgage loans. Student loan borrowers owed a total of $1.728 trillion in student loan debt by the end of the first quarter of 2021. The average balance held per borrower as of the end of March 2021 was $37,100.
That’s a lot of money to have to pay back. But it can be a saving grace when you can’t afford the rising cost of education. Although being approved for a student loan is the first step, you may find some hiccups with your student loan provider. This article looks at the companies with the most student loan complaints filed with the Consumer Financial Protection Bureau (CFPB) and may help guide you before you actually apply.
- A student loan is a form of debt used to pay for education-related expenses.
- The Consumer Financial Protection Bureau compiles an annual list of consumer complaints received by student loan providers.
- The CFPB received 5,300 complaints about student loans between September 2020 and August 2021.
- AES/PHEAA was the lender with the most complaints about federal student loans.
- Navient was the lender with the most complaints about private student loans.
Student Loan Basics
One of the most important things people need to consider before applying for college is how they expect to pay for it. Some people are lucky enough to afford to pay for their education upfront. But that’s not the case for everyone. Many families plan ahead by opening a college savings plan while others work their way through school to pay tuition fees and related expenses. But even with these options, the majority of college-goers still need a financial boost. This means they may have to turn to student loans.
A student loan is a type of debt individuals take out to help pay for the costs associated with education—generally higher education. This includes undergraduate and graduate studies, doctorates, medical and dental school, and others. Student loans can be used to pay for tuition, housing, fees, and other related expenses.
Loans fall into two different categories: federal and private. Federal student loans are administered by the U.S. Department of Education. Qualifying for one of these loans requires completing an application. This is called the Free Application for Federal Student Aid (FAFSA).
Loan eligibility and approval is based on personal circumstances and financial information for applicants and their families. Private loans, on the other hand, are issued by private lenders such as banks and credit unions, as well as other financial institutions. While federal loans are based on financial need and merit, private loans are based on credit history. Interest rates also differ between the two. While federal loans tend to have lower rates, private lenders often charge borrowers much higher rates.
The CFPB Report
The Consumer Financial Protection Bureau collects complaints from the general public about financial products and services. These complaints are put into a database, published, and sent to the company. Complaints are divided by product and service into a database, which consumers may access at any time.
Student loan complaints are filtered through an ombudsman to help provide borrowers with assistance. These complaints are compiled into a report published by the agency every year. This report is sent to several committees as well as the following individuals:
- The Secretary of the Treasury
- The Secretary of Education
- The CFPB’s director
The ninth annual report was published in October 2021. The information compiled into the report was collected between Sept. 1, 2020, to Aug. 31, 2021. A total of 5,300 complaints were lodged with the agency, where 3,414, or 64%, were placed against federal loan providers, while 1,923, or 36%, were against private loan providers.
Student Loan Complaints
Consumers identified the following issues as being the most troublesome when it came to their student loan providers:
- Dealing with lenders or suppliers. The main complaint under this category was that people said they received bad information about their loans. This was followed by trouble with how payments are handled. The third complaint was problems dealing with customer service.
- Difficulties repaying student loans. The main complaint under this section is that borrowers feel they can’t get flexible repayment options. The second most common complaint under this category was that lenders didn’t allow borrowers to delay making payments temporarily. The third category was problems borrowers encountered trying to lower their monthly payments.
- Problems related to borrowers’ credit reports or scores. Borrowers complained about incorrect account statuses. The second largest complaint was that lenders didn’t fix errors on the borrowers’ credit reports. The third largest complaint was about incorrect account information.
These were the companies with the most complaints about private student loans:
California was the state with the highest number of complaints for private students loans, with a total of 196 complaints, followed by:
- Texas: 149 complaints
- Florida: 130 complaints
- New York: 119 complaints
- New Jersey: 84 complaints
You can submit a complaint about your student loan or other financial product/service directly to the CFPB through its website.
The following companies had the most complaints about federal student loans:
Once again, California had the highest number of complaints registered for federal student loans with a total of 334. This was followed by:
- New York: 243 complaints
- Florida: 227 complaints
- Texas: 216 complaints
- Pennsylvania: 181 complaints
The CFPB database receives complaints about many different financial products and services. Only 0.6% of these complaints were related to student loans in 2021, which fell near the middle of the pack. The number one complaint lodged by consumers was related to credit or consumer reporting (68.8%), while debt collection came in second at 12.9% of the total number of complaints. Checking or savings complaints ranked third at 4.2% of the total number of complaints.
The impact of the global COVID-19 pandemic must be considered relative to this report. The federal government provided some relief to federal student loan borrowers through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. For instance, borrowers of certain federal student loans qualified for temporary payment relief under the act, with payments initially halted until Sept. 31, 2020.
The deadline has been extended several times since then. Most recently, on Dec. 22, 2021, the U.S. Department of Education announced that the student loan payment pause would be extended through May 1, 2022.
Those who qualify and continue to pay are eligible to receive a 0% interest rate, allowing them to pay their debt off much faster. Collections are stopped for those who are in default during this period.
Although these provisions don’t extend to private loans, many private lenders continue to provide some financial relief to their borrowers by making accommodations such as payment deferrals and other arrangements.
The Bottom Line
Using the information above can help you better prepare yourself before you start to fill out your student loan applications. But remember that this should serve as just a guide. You don’t have to eliminate a lender because it appears on the list. Base your decision on your personal situation.