When it comes to financing her education, University of Minnesota art and psychology freshman Aubrey Peng doesn’t have a choice.
This academic year alone, Peng will borrow $25,000 in private student loans. She said she has no plan in place to pay off her debt after graduation.
Private student loans, or PSLs, account for 15 percent of the country’s $165 billion outstanding student loan debt despite being only about 7 percent 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 complained-about private student loan firm in every state but Minnesota and Alaska. In Minnesota, it ranked second.
The CFPB estimated Sallie Mae owns half of the private student loan market.
Last year, 10 percent 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, an international student from China, isn’t eligible for federal loans and said Sallie Mae is one of only a few U.S. companies that lend students money without a U.S. citizen as a co-signer.
“It kind of worries me,” she said about the firm’s high volume of grievances. “But since it’s my only option, even if it was a fire pit, I’d have to jump into it.”
The most complained-about private lender in Minnesota is Wells Fargo, which ranked third overall nationwide. The San Francisco-based bank had 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.
High-debt student loan borrowers, or those with $40,000 or more in debt after graduation, disproportionally use private loans to pay for school, the report said.
Matt Forstie, Minnesota Student Legislative Coalition chair, said private loans are a concern because they’re more expensive than other types of loans.
“The students that take them out are the ones with the most financial burden or are the most vulnerable,” he said. “You take out a private loan if you’ve exhausted your other options.”
The majority of private loan complaints filed to the CFPB were about repayment issues, which ranged from deferment to billing and fees.
Students can report problems with lenders to the agency, and it will file a report with the lender. Of the 4,300 complaints analyzed since March 2012, the CFPB helped 330 consumers receive monetary relief.
“This shows that there was some wrongdoing [by the lender],” Forstie said.
He said the USPIRG report and its findings show the CFPB is a good resource for students.
“[The CFPB] has proven to be an awesome tool for students in its few years of existence,” he said.
The report found that borrowers in the Midwest and South are less likely to submit complaints than those in other parts of the country, but Forstie said students should take advantage of the CFPB.
“It’s been successful in getting results where other agencies have failed,” he said.
Peng went to high school in the U.S. and is in the middle of filing for permanent residency. If she qualifies, she can qualify for federal student loans. But until then, she will have to continue with private borrowing.
“There’s nothing else I can do,” she said. “I have to go to school, you know?”
