Private student loans represent 7% of the market but 15% of the debt.
When it comes to funding her education, Aubrey Peng, a freshman art and psychology student at the University of Minnesota, has no choice.
This academic year alone, Peng will borrow $ 25,000 in private student loans. She said she had no plan in place to pay off her debt after graduation.
Private student loans, or PSLs, make up 15% of the country’s outstanding $ 165 billion student loans, while they only make up about 7% of all student loans taken out last year, according to a U.S. Public Interest Research Group report released Oct. 24.
The report analyzed 4,300 complaints about PSLs filed with the Consumer Financial Protection Bureau since March 2012 and found that Peng’s lender, Sallie Mae, was the most criticized private student loan company in any state, in the except Minnesota and Alaska. In Minnesota, he placed second.
The CFPB has estimated that Sallie Mae has half of the private student loan market.
Last year, 10% of undergraduates at the University’s Twin Cities campus collectively took out about $ 8 million in private student loans, according to the Office of Institutional Research.
Peng, a Chinese international student, is not eligible for federal loans and said Sallie Mae is one of the few US companies to lend money to students without a US citizen as a co-signer.
âIt worries me a bit,â she said of the firm’s high volume of grievances. “But since it’s my only option, even if it was a home, I should jump in.”
The most criticized private lender in Minnesota is Wells Fargo, which ranked third nationally. The San Francisco-based bank received 21 complaints in Minnesota.
Minnesota has the fourth highest average debt for a four-year degree at $ 29,058, according to the Minnesota Public Interest Research Group.
Heavily indebted student loan borrowers, or those with debt of $ 40,000 or more after graduation, disproportionately use private loans to pay for their education, according to the report.
Matt Forstie, chairman of the Minnesota Student Legislative Coalition, said private loans are a concern because they are more expensive than other types of loans.
âThe students who take them out are the ones who have the most financial burdens or are the most vulnerable,â he said. âYou take out a private loan if you’ve exhausted your other options. “
The majority of private loan complaints filed with the CFPB concerned repayment issues, which ranged from postponement to billing and fees.
Students can report problems with lenders to the agency, and the agency will file a report with the lender. Out of the 4,300 complaints analyzed since March 2012, the CFPB has helped 330 consumers to benefit from monetary relief.
“It shows that there have been wrongdoing [by the lender]”said Forstie.
He said the USPIRG report and its findings show that the CFPB is a good resource for students.
“[The CFPB] has proven to be a great tool for students over its few years of existence, âhe said.
The report found that borrowers in the Midwest and the South are less likely to file complaints than those in other parts of the country, but Forstie said students should take advantage of the CFPB.
âHe was able to get results where other agencies failed,â he said.
Peng went to high school in the United States and is in the process of applying for permanent residence. If she qualifies, she can qualify for federal student loans. But until then, it will have to continue with private borrowing.
âI can’t do anything else,â she said. âI have to go to school, you know? “