In the world of student loans, things look grim. Borrowers owe an estimated $1.6 trillion in student loans—a figure which is second only to mortgage debt in the total amount of consumer debt attributed to Americans. Student loan borrower were hopeful that the Biden administration—which promised to provide up to $20,000 in relief for student loan borrowers—would deliver relief. Biden’s first attempt at widespread student loan debt cancellation was expected to cost $400 billion over 30 years, and provide complete relief for 20 million borrowers. Yet, it was not to be.
The Supreme Court of the United States’ decision in Biden v. Nebraska invalidated the Biden administration’s cancellation plan, dismaying millions of student loan borrowers. Now, their payments are set to resume in on September 1, 2023, which is expected to cause widespread hardship. Many student loan borrowers will once again have to choose between paying down their student loans and paying rent, buying groceries, and other necessities.1
These problems are not new. In our recently published article, we find that student loan borrowers have long complained about the difficult financial choices they must make to repay their student loans. For example, in 2017, one borrower wrote:
“I owe an outrageous amount of money and therefore they want me to pay an outrageous amount each month. I can’t afford the payments they want me to pay. . . . I literally have to go without groceries just to pay this bill because I don’t want to default on my loan and have that reported on my credit report.”
In our paper, we studied narratives associated with student loan complaints from the Consumer Finance Protection Bureau’s consumer complaint database. In doing so, we found that borrowers are primarily concerned about: 1) a mismatch between ability to repay and repayment options, including problems with forbearance, deferments, the public service loan forgiveness program, income-driven repayment plans, and loan cancellation options; 2) customer service, including sudden and unexplained changes in payment obligations, 3) inappropriate payment processing, such as misapplying payments; and 4) unauthorized loans or outright scams.
The student complaints were heart-breaking. For example, a 2022 complaint against Navient alleged that the student had borrowed $25,000 to attend a school that had since been closed for defrauding students. But while the US Department of Education had cancelled the federal student loans of students who attended the school, the borrower alleged that their private loans were not similarly forgiven. And, despite paying for 16 years, the borrower still owed $15,000 to pay for an “education” from a predatory college.2
Other borrowers alleged that they simply cannot repay but their creditor—often a company hired by the United States government—is indifferent to their plight. For example, one borrower wrote:
“After Hurricane florence hit the carolinas I called in to see about putting my payments on hold . . . and basically I was told that until i’m homeless and hungry they don’t care how I make the payments they just need to be paid. . . .”
Likewise, a major theme in the complaints we reviewed was that student loan servicers provide horrible customer service. To wit:
“I’ve been having a hard time getting answers about my student loans. I’ve been redirected, hung up on. My loans have been bought and sold adding to the fees and penalties. It’s overwhelming, it’s scary, and it’s been making my life so horrible. I wish I didn’t get the fake education from the XXXX. And then have to deal with predatory loans. It’s ruining my life. . . .”
In addition, we found that student loan borrowers frequently found themselves in positions where their payments were misapplied. One borrower complains:
“I have a student loan with Wells Fargo. I tried to set up automatic payments greater than the required monthly amount and was told that Wells Fargo does not offer that option. I was advised that I should set up an automatic payment from my bank account and the additional payments would be applied to principal (as I believe they should be). The first automatic bill pay from my checking account was made to my student loan with Wells Fargo on XXXX XXXX, 2015 for $50.00 and the full amount was applied to interest.”
And finally, because of the lack of consumer protection regulation that pervades the student loan market, several borrowers note that they have been the subject of scams.
“I spoke with XXXX XXXX at XXXX Loan Consolidation on XXXX XXXX, 2015. He assured me that once I went through the process and paid $590.00 to consolidate my loans, they would pay my loans off. I would pay $XXXX/month. I have been paying since XXXX 2015 and contacted XXXX to discuss my total loan amount that I saw on their website. It was $2000.00 more than my initial amount and they told me that my loans had not been paid since XXXX 2015.”
None of this is not to say that student loan repayment obligations are something to be shirked. Rather, the parties to student loans need equal footing in the contracting process that would yield bilateral and not one-sided adhesion contracts. Borrowers lose when the student loan system continues to offer unfair terms, other monopolistic and market-uncompetitive rates and repayment plans, poor customer service, and outright scams, given the lack of regulation in the industry.
In giving voice to these borrowers’ complaints, we underscore the clear need for meaningful reform in the student loan sector. It is our hope that these complaints will lead to change, given that these borrowers have had promises to them be voided in the courts.
Matthew A. Bruckner is an Associate Professor of Law at Howard University School of Law.
Christopher J. Ryan, Jr. is an Associate Professor of Law at the University of Louisville Brandeis School of Law.
This post was adapted from their paper, “Student Loans and Financial Distress: A Qualitative Analysis of the Most Common Student Loan Complaints,” available on SSRN.
