College students who take out private student loans to pay for school are often surprised by the terms of their loans once they graduate, according to a new Consumer Financial Protection Bureau report.
The bureau's student loan ombudsman released the annual report Monday.
The report outlines complaints made to the agency by private student loan borrowers.
Among other issues, borrowers reported having trouble understanding how much they owed and being unable to find out who owns a loan once it's been sold.
Rohit Chopra, the bureau's student loan ombudsman, said the report was based on anecdotal data, and wasn't intended to be statistically significant.
The report is based on an analysis of about 2,900 private student loan complaints, comments and other submissions from borrowers.
Terms can be difficult
Unlike federal student loans, private loans don't offer protections like income-based repayment plans, discharges upon death or military deferments.
That lack of protection left many borrowers in a difficult position when they graduated and weren't able to make payments, Chopra said.
Borrowers can't refinance or modify those loans, he said, so borrowers who made partial payments still found themselves in default.
According to the report, about 95 percent of the complaints had to do with the servicing of the loans.
Those included complaints about billing, deferment, fraud and credit reporting.
Many of those complaints came from borrowers who ran into roadblocks when they tried to repay their loans, Chopra said.
In many cases, he said, borrowers reported that payments left their bank accounts but weren't credited against their loan accounts in a timely fashion.
Similar to home loans
Earlier this year, the bureau and the U.S. Department of Education released a joint report on the issue of private student loans.
According to that report, the market for private student loans in the mid-2000s was marked by aggressive marketing and relatively lax consumer protection standards, much like the market for subprime mortgages.
Chopra emphasized that similarity again Tuesday, saying the frustration and confusion private student loan borrowers face is similar to that of home loan borrowers who seek loan modifications in the hopes of staying in their homes.
Chopra said he hopes to see the report serve as the first step in a more comprehensive review of private student loans.
More work will be needed to understand what policymakers can do to help solve the situation, he said.