Many private student loan borrowers are being driven into default due to a lack of information and affordable loan modification options, according to a report released Thursday by the Consumer Financial Protection Bureau. The report analyzed more than 5,300 private student loan complaints received during a one-year period from October 1, 2013, to September 30, 2014, a jump of 38 percent from the previous year. Many of the borrowers who filed complaints say they are committed to repaying their loans if they could be restructured to meet current financial circumstances, but they are finding there are no viable modification options, thus driving the borrowers into default.
According to CFPB, more than 7 million Americans are currently in default on student loans, totaling more than $1.2 trillion dollars in outstanding loan debt. Since a default severely damages a borrower's credit score for many years, borrowers who default on student loans will likely have trouble obtaining credit in the future for large purchases such as housing. CFPB is currently offering online tools to help private student loan borrowers who are at risk of default.
About 40,000 homeowners nationwide received permanent mortgage loan modifications from servicers in August, which includes loans completed through proprietary programs and under the government's Home Affordable Modification Program, according to data released by the HOPE NOW Alliance on Thursday. The number of total mortgage solutions, which include loan modifications, short sales, and deeds-in-lieu of foreclosure, outnumbered foreclosure sales by a five to one ratio. Mortgage solutions totaled 163,000 for the month of August compared to 34,000 foreclosure sales.