The Consumer Financial Protection Bureau (CFPB) has released a report concluding
that people with private student loans are driven into default because
of their lenders' failure to provide information on loan modifications
and default prevention. With the growing number of student loan borrowers
going into default, the CFPB urges private lenders and servicers to become
more aware and offer more options to aid student loan borrowers. Evidence
of private lenders' neglect and lack of appropriate consumer care
can be seen in the increase in the number of complaints that were received by CFPB.
It appears that private lenders are less lenient than public ones, and
they offer less options for borrowers who experience financial difficulties.
Unlike the federal program, private lenders are not able to offer a different
payment plan that will decrease borrowers' monthly payments. The federal
program seeks to help and rehabilitate borrowers by extending deferment
based on borrowers' current financial and employment situation, while
private lenders allow more loans to go into delinquent then default. As
a result, borrowers' credit scores suffer tremendously, and their
poor credit profiles make it hard for them to find jobs, apartments, and
obtain loans for other opportunities.
The CFPB finds that private lenders and servicers have not made available
important information on loan modifications. Additionally, there are miscommunications
between borrowers and lenders over eligibility of certain repayment plans.
Although lenders offer something comparable to public deferment, in the
form of a 'temporary forbearance plan', where payments are suspended
for a few months, the interests on those loans capitalize and borrowers
are often in worse shape when forbearance period ends.
Unfortunately, the CFPB does not have the authority to help student loan
borrowers, because their main source of power and authority has been created
to focus on curbing abusive practices on behalf of consumers. However,
the CFPB has tried to help borrowers my offering tools that would allow
them to take action when it is necessary. The CFPB has offered sample
complaint letters, and interactive online tools to help student loan borrowers
calculate their repayment options. They conduct investigations and public
reports in hopes of providing information to borrowers and in hopes of