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Report: Consumer Protection
Private Loans, Public Complaints
The Consumer Financial Protection Bureau (CFPB) was established in 2010 in the wake of the worst financial crisis in decades. Its mission is to identify dangerous and unfair financial practices, to educate consumers about these practices, and to regulate the financial institutions that perpetuate them.
To help accomplish these goals, the CFPB has created and made available to the public the Consumer Complaint Database. The database tracks complaints made by consumers to the CFPB and how they are resolved. The Consumer Complaint Database enables the CFPB to identify financial practices that threaten to harm consumers and enables the public to evaluate both the performance of the financial industry and of the CFPB.
This report is the second of several that will review complaints to the CFPB nationally and on a state-by-state level. In this report we explore consumer complaints in the private student loan sector with the aim of uncovering patterns in the problems consumers are experiencing with their student loans. Student consumers can obtain federal student loans, private student loans or both to pay for higher education. Private student loans (PSLs) are typically far more risky and expensive for consumers seeking a way to pay for college. Private student loans, like credit cards, generally offer variable interest rates that are higher for those borrowers with the least means.
Repayment options are also severely limited. Federal student loans, by contrast, are typically subsidized at a fixed interest rate and offer repayment options like deferment, income-based repayment and loan forgiveness that can help the borrowers respond to job changes, job loss, illness or other changes in income. PSLs accounted for about 7 percent of all student education loans taken out last year, and account for 15 percent of outstanding student loan debt in the United States. The current debt owed by consumers in the United States on their private student loans is estimated to be approximately $165 billion.
Since the Consumer Financial Protection Bureau began collecting data on private student loans in March 2012, the CFPB has recorded more than 4,300 complaints about problems with private student loans [as of August 6, 2013]
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