Complaints are up about private student loans
The Consumer Financial Protection Bureau (CFPB) recently published a mid-year reporting private student loan challenges.
Problems are becoming prevalent for consumers holding private student loans according to the Consumer Financial Protection Bureau (CFPB). The CFPB recently released a mid-year report on student loan complaints. The largest increases were grievances from borrowers around private student loan lenders and co-signer release issues.
Private student loans do not have the same protections as federal student loans. Banks, credit unions and schools service and provided these services. For borrowers, this can be confusing and challenging if they do not take the time to read the promissory note/contract of their private loans and understand the terms. CFBP reported that the major complaints on private loans were that the contracts were confusing and terms were not clear and not clear on issues of releasing co-signers.
In 2011, 90 percent of all private student loans were co-signed by relatives of the student. The private student loan lenders often advertised that the co-signer can be released once a borrower makes a certain number of on-time payments. Complaints filed with CFPB indicate otherwise.
One example is, in that order for a co-signer to be released, the borrowers may be required to have a certain credit score before that can happen. Often this term is not clearly stated in the loan documents. Another major issue has been that private loan contracts may have provisions that allow them to put the loan in default, even if the loan is in good standing, if a co-signer dies or declares bankruptcy. Unknowingly to the borrower, their credit will be negatively affected.
Private student loan borrowers need to thoroughly review their promissory notes/contracts and make sure they understand the terms of their loans. If there is a co-signer, CFPB has a sample letter that they encourage borrowers to send to their lenders requesting options on how to release co-signers. The CFPB also has a sample letter that can be used to get information on how private student loans payments are processed. This is especially important if more than the minimum amount is paid. This information will assist on paying off loans earlier.
CFPB has a student loans ombudsman that will assist borrowers with issues, questions and complaints around all student loans. Borrowers or co-signers of all student loans may contact the CFPB either online or by calling 855-411-2372