A recent report by the Consumer Financial Protection Bureau (CFPB) indicates some of the business practices of large student loan lenders may be making it particularly difficult for borrowers to repay their loans. In the last year, the CFPB handled approximately 5,300 private student loan complaints. The largest category of complaints were related to the lack of repayment options and flexibility in times of stress. The report concludes that lenders are not providing clear information about the availability of repayment options. In addition, when lower monthly repayment plans were negotiated some lenders allocated the payments in a way to maximize late fees.
Sallie Mae and Navient Fined Millions of Dollars
As a result, the Federal Deposit Insurance Corporation (FDIC) determined that two lenders, Sallie Mae and Navient, violated federal law prohibiting unfair and deceptive practices in regards to student loan borrowers. The FDIC ordered Sallie Mae and Navient to stop these deceptive practices and to pay approximately $30 million to victims, plus other penalties.
To make matters worse, the Department of Justice found that Sallie Mae and Navient were not following the law in regards to the limit on interest rates for U.S. service members. The companies were fined $60 million for these violations.
In other words, not only do the private student loans not provide the repayment flexibility of federal loans, some of our nation’s largest lenders have been violating lending laws in order to increase their profits.
What Can You Do?
- You can complain. If you are having difficulties working with lenders to repay your student loans, file a complaint with the Consumer Financial Protection Bureau. It’s through this complaint process that the CFPB can investigate bad lending practices.
- Ask the CFPB to help you negotiate with your lender. You also can download a sample letter from the CFPB website that clearly states the type of information you need from your lender in order to understand your repayment options, .
- Understand your repayment options. Repayment options are in place for federal student loans such as Stafford, Grad PLUS, Direct, or Perkins loans. For example, a popular options is the Income-Based Repayment Plan. This plan ties your monthly payment to your income and family size. Another option for borrowers with newer loans is the Pay As You Earn (PAYE) repayment plan. It caps your monthly federal student loan payment at 10 percent of your discretionary income. For more information about these options visit the Consumer Financial Protection Bureau’s website.
Repaying student loan debt is challenging in the best of circumstances. We don’t need lenders making it extra challenging by failing to follow lending laws. Reach out to the CFPB if you’re not receiving the information you need from your lender.
For more information about student loan repayment, read this Plan Well, Retire Well blog post:
Please share these posts with friends and family members who may be struggling with how to repay their student loans. Thank you!