Private Student Loan Companies and Consumer Complaints
Are you struggling with student loan payments? You’re not alone. According to a recent article in the Chicago Tribune, consumers throughout Oak Park and the Chicago area have joined debtors across the country in filing complaints about private student loan companies. Private student loan companies have different interest terms than federal loans, and they also can have fine-print details that can hurt consumers.
For instance, a number of private student loan lenders don’t have the same deferment terms as federal loans. If you have a federal loan and are enrolled full-time in a degree-granting program, your federal loans will remain in deferment. However, a growing number of private student loan lenders have instituted maximum deferment times, meaning that a borrower who is enrolled full-time in school—and not making a regular income—may find out that his or her student loans have come due. Can any of these consumers turn to personal bankruptcy as a solution?
Increase in Consumer Complaints About Private Lenders
In the past year, complaints about student loans have risen by nearly 40 percent, according to the article in the Chicago Tribune. Indeed, the Consumer Financial Protection Bureau’s (CFPB) annual reported indicated that it had received approximately 5,300 complaints concerning private student loan providers in 2013. That number shows a 38 percent increase from 2013.
At the same time, however, complaints have dropped about certain lenders. For instance, Discover (usually associated with credit cards), had about $4.3 billion in private student loans as of June 2014, which showed an increase from its $4 billion at the end of 2013. This type of loan is “a relatively small but growing piece of business for Discover,” yet complaints against the company don’t seem to be on the rise. According to the CFPB’s complaint portal, complaints about Discover’s private student loans actually decreased over the last year, from 174 complaints to 165.
Even though complaints against Discover aren’t going up, it’s still under investigation for its “student loan servicing practices.” What’s the problem with Discover? The company indicated that private lenders have been “under pressure to expand the availability of loan modifications for borrowers.” Yet the CFPB also has concerns about Discover holding borrowers liable in the “event of a co-signer’s death or bankruptcy.” As a result, Congress wants legislation that “would make it easier to discharge private student loan debt in bankruptcy.”
Other concerns involve the determination of interest rates, and the treatment of servicemembers’ student loan debt. Can Congressional action help to ease the private student loan burden of residents in the Chicago area?
Including Private Student Loans in Bankruptcy
One of the primary changes to legislation, according to a report in Forbes, involves allowing borrowers to “include private student loans in bankruptcy.” Currently, it’s not impossible to have student loans discharged when filing for consumer bankruptcy, but it’s pretty difficult.
Will the bill pass? According to Josh Mitchell in The Wall Street Journal, the proposed legislation “isn’t likely to pass this year, given the midterm elections and broad partisan disputes over higher-education policy.” At the same time, however, it puts the issue firmly on the table and makes clear that many American could benefit from changes to personal bankruptcy laws.
If you have questions about your obligations to private lenders or the possibility of having student loans discharged in bankruptcy, you should speak with an experienced Oak Park bankruptcy attorney. Contact us today to learn about your options.
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