Connecticut borrowers with private student loans have one of the highest complaint rates in the nation. The figures have been compiled by consumer rights group ConnPIRG, from the database of the Consumer Financial Protection Bureau.
Most people opt for federal loans when they borrow money for school, but loans through private companies account for about 15 percent of outstanding student loan debt. That currently amounts to a total of $165 billion.
Abe Scarr, Director of ConnPIRG said, “Private loans don’t have the same types of consumer protections that federal student loans do. They’re definitely a riskier type of loan for students to take out. Unfortunately, many students, in order to afford to go to school, have to take out more than they’re able to get in federal student loans.”
Sallie Mae is, by far, the dominant force in the business, with a full 50 percent of the private student loan market, so it registers the most complaints. On a per capita basis, it actually performs better than lenders with a smaller share of the market, like Discover, Wells Fargo and Citibank.
The highest number of complaints related to repayment issues, like billing, fees, fraud, and credit reporting. Borrowers in the northeast were particularly likely to complain. Connecticut registered the third-highest complaint rate in the nation. Scarr said we don’t quite understand yet why that is. “One theory would be that in this region of the country," he said, "people are more dependent on private student loans, and there’s a higher rate of taking out student loans, and therefore a higher rate of complaint.”
The report also noted the rate at which the Consumer Financial Protection Bureau is getting resolution on complaints. Eight percent resulted in monetary compensation, while a further 12 percent were settled with non-monetary relief.