One of the most important things people need to consider before applying for college is how they expect to pay for it. Some people are lucky enough to afford to pay for their education upfront. But that's not the case for everyone. Many families plan ahead by taking out a college savings plan while others work their way through school to pay tuition fees and related expenses. But even with these options, the majority of college-goers still need a financial boost. This means they may have to turn to student loans. And the number of people who do is growing.

There are more than 45 million student loan borrowers in the United States, making it one of the largest types of consumer debt—only second to mortgage loans.  Student loan borrowers owed a total of $1.677 trillion in student loan debt by the end of the second quarter of 2020.  The average balance held per borrower as of June 2020 was $37,000, while Forbes reported the average graduate of the class of 2018 was $29,200.   That's a lot of money to have to pay back—but it can be a saving grace when you can't afford the rising cost of education. Although being approved for a student loan may be a godsend, you may find some hiccups with your student loan provider. This article looks at the companies with the most student loan complaints filed with the Consumer Financial Protection Bureau (CFPB) and may help guide you before you actually apply.

Key Takeaways

  • A student loan is any debt a borrower uses to pay for any expenses related to education.
  • The Consumer Financial Protection Bureau receives consumer complaints from student loan providers and compiles the data into an annual list.
  • The CFPB received almost 7,000 complaints between September 2019 and August 2020.
  • AES/PHEAA was the lender with the most complaints about federal student loans.
  • Navient had the most complaints about private student loans.

A Word About Student Loans

A student loan is a type of debt individuals take out to help pay for the costs associated with education—generally higher education. This includes undergraduate and graduate studies, doctorates, medical and dental school, and others. Student loans can be used to pay for tuition, housing, fees, and other related expenses.

Loans fall into two different categories—federal and private. Federal student loans are administered by the U.S. Department of Education. Qualifying for one of these loans requires completing an application. This is called the Free Application for Federal Student Aid (FAFSA). Loan eligibility and approval is based on personal circumstances and financial information for applicants and their families. Private loans, on the other hand, are issued by private lenders such as banks and credit unions, as well as other financial institutions. While federal loans are based on financial need and merit, private loans are based on credit history. Interest rates also differ between the two. While federal loans tend to have lower rates, private lenders often charge borrowers much higher rates.

The CFPB Report

The Consumer Financial Protection Bureau collects complaints from the general public about financial products and services. These complaints are put into a database, published, and sent to the company. Complaints are divided by product and service into a database, which consumers may access at any time.

Student loan complaints are filtered through an ombudsman to help provide borrowers with assistance. These complaints are compiled into a report published by the agency every year. This report is sent to several committees as well as the following individuals:

  • the Secretary of the Treasury
  • the Secretary of Education
  • the CFPB's director 

The eighth annual report was published in October 2020. The information compiled into the report was collected between Sept. 1, 2019, to Aug. 31, 2020.  A total of 6,950 complaints were lodged with the agency—where 5,014 or 72% were placed against federal loan providers, while 1,936 or 28% were against private loan providers. 

Student Loan Complaints

Consumers identified the following issues as being the most troublesome when it came to their student loan providers:

  • Dealing with lenders or suppliers. The main complaint under this category was that people said they received bad information about their loans. This was followed by trouble with how payments are handled. The third complaint was that borrowers don't agree with the fees charged by the lender. 
  • Difficulties repaying student loans. The main complaint under this section is that borrowers feel they can't get flexible repayment options. The second category was problems borrowers encountered trying to lower their monthly payments. The third most common complaint under this category was that lenders didn't allow borrowers to delay making payments teporarily. 
  • Problems related to borrowers' credit reports or scores. Borrowers complained that lenders didn't fix errors on their credit reports. The second and third largest complaints were about incorrect account statuses and incorrect account information. 

These were the companies with the most complaints about federal student loans:

Company Name Number of Complaints
AES/PHEAA 1,208
Navient  1,143
Nelnet 496
Premier Student Loan Center  66
Great Lakes 51
Source: Annual Report of the CFPB Private Education Loan Ombudsman

California had the highest number, with a total of 475 complaints, followed by:

  • Texas: 356 complaints
  • Florida: 332 complaints
  • New York: 327 complaints
  • Georgia: 225 complaints 

You can submit a complaint about your student loan or other financial product/service directly to the CFPB through its website.

The following companies had the most complaints about private student loans:

Company Name Number of Complaints
Navient 676
Sallie Mae 145
AES/PHEAA 133
Nelnet 84
Discover Bank 76
Source: Annual Report of the CFPB Private Education Loan Ombudsman

Once again, California had the highest number of complaints registered for private student loans with a total of 238. This was followed by:

  • Texas: 135 complaints
  • New York: 130 complaints
  • Florida: 121 complaints
  • Pennsylvania: 98 complaints 

Special Considerations

The CFPB database receives complaints about many different financial products and services. Only 1.6% of these complaints were related to student loans, which fell near the middle of the pack. The number one complaint lodged by consumers was related to credit or consumer reporting (52.9%), while debt collection came in second at 17.3% of the total number of complaints. Credit card complaints ranked third at 7.7% of the total number of complaints. 

Global Pandemic

There is one very important consideration to note about this particular report—the global COVID-19 pandemic. The federal government provided some relief to federal student loan borrowers through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. For instance, borrowers of certain—but not all—federal student loans qualify for temporary payment relief under the act.  This means that payments for those who qualify are halted until Dec. 31, 2020. Those who qualify and continue to pay are eligible to receive a 0% interest rate, allowing them to pay their debt off much faster.  Collection calls are stopped for those who are in default during this period. 

Although these provisions don't extend to private loans, many private lenders continue to provide some financial relief to their borrowers by making accommodations such as payment deferrals and other arrangements.

The Bottom Line

Using the information above can help you better prepare yourself before you start to fill out your student loan applications. But remember that this should serve as just a guide. So don't eliminate a lender because it appears on the list. Base your decision on your personal situation.