Problem With a Private Student Loan? Federal Agency Will Take Your Complaint

March 05, 2012

The Consumer Financial Protection Bureau will begin collecting complaints regarding private student loans, its director announced today.

In a statement, Richard Cordray said the bureau will be a "one-stop federal agency" where borrowers can "ask questions, get information, and file a complaint."

Until recently, private student lenders were regulated by a patchwork of state and federal authorities. Student borrowers with complaints about loans made through private lenders have had to comb through bank charters and navigate an "alphabet soup" of acronyms to determine which agency to write to, Rohit Chopra, the bureau's ombudsman, said on Monday at a student-aid symposium held by the National Association of Student Financial Aid Administrators.

The consumer bureau, which has had oversight over private student loans since last July, will forward complaints about federal student loans to the Department of Education.

The announcement comes four months after the bureau asked members of the public to share their experiences with the private student-loan market. The bureau has received thousands of comments to date and plans to issue a report on private lending this summer.

The bureau is also soliciting feedback on a draft disclosure form for the letters that colleges send to students offering financial aid. At Monday's forum, Mr. Chopra, the ombudsman, said students and families are seeking three data points: estimated debt at graduation, estimated monthly payment, and projected ability to repay.

These items do not appear on most award letters, and they're "not easy to capture," Mr. Chopra acknowledged. But they are "critical" to the decision-making process, he argued.

During a question-and-answer session, Elizabeth Keuffel, director of financial aid at Saint Anselm College, in New Hampshire, questioned the wisdom of "putting everything into a little box."

"The loss of nuance scares me," she said. "There is misinformation in aggregation."

Mr. Chopra said he sympathized with her concerns but maintained that simplicity is ultimately preferable to complexity.

"A lot of the same arguments account for the long, full-of-vomit credit-card agreements" that nobody reads, he said. "I think we reserve too much for nuance."