CFPB Data Analysis Update

With the expansion of the Consumer Financial Protection Bureau’s (CFPB) complaint database, companies are now able to examine consumer complaints for seven different product areas, including student loans. In the CFPB’s 2013 mid-year summary of student loans, they analyzed about 2,000 student loan complaints filed between October 2012 and March 2013. To add more context to these findings, Beyond the Arc uncovered additional insights as part of our ongoing analysis of the CFPB complaint database. By analyzing complaints, companies can learn more about the potential root causes, and work to prevent regulatory complaints from being filed.

How popular are student loans?  According to the U.S. Department of Education:

Nearly half of all undergraduates take out student loans over the course of their enrollment to help them pay for their postsecondary education; this includes nearly two-thirds of students who attend private nonprofit 4-year colleges and about 90 percent of students enrolled in for-profit institutions. (Stats in Brief, April 2013)

Key findings from the CFPB’s summary

• Most complaints from Sallie Mae – 75% of complaints came from eight companies, with Sallie Mae topping the list.
• Top complaint is non-flexible loan terms – The main complaint by student consumers is the inability to modify loan payment terms to either lower monthly payments or reflect current credit standing.
• Additional pain points – Problems getting information, receiving conflicting information, and payment processing of loans continue to remain pain points for customers.

New insights from Beyond the Arc’s analysis

The CFPB’s report prompted us to analyze updated data to find further insights about consumer issues with student loans. Looking at over 5,100 student loan complaints from March 2012 to October 2013, here’s what we found….

Complaints based on state population

Viewing consumer complaints with a different lens, we analyzed the states in which each complaint was filed. When we compared each state’s estimated 2012 population with the CFPB student loan data, we saw an interesting pattern emerge: the states with the highest number of complaints per 100,000 people were all in the upper east coast of the United States (excluding the District of Columbia) with Massachusetts being number one.

60 of the nation’s top 100 most expensive colleges are located in these states, according to campusgrotto.com. Students obtaining larger loans for more expensive colleges appear to be facing more problems over the life of their loan.

The issue of growing debt from student loans is receiving a great deal of attention in the State of Massachusetts—the state that also happens to be ranked #1 in consumer complaints (see chart, above). The Boston Globe interviewed state Senator Eileen M. Donoghue, co-chair of a legislative committee on higher education. “We are hearing from students who are really struggling and just trying to stay in school, working sometimes two or three jobs and still coming out of school with enormous debt and no job prospects,” Donoghue said.

Key takeaway

Every year the cost of college increases, not only on the upper east coast, but across the country, which means students will likely need to borrow even more money to finance their education. This trend signals a call to action for banks offering college financing to develop or adjust business strategies that reduce and prevent customer complaints about student loans. The CPFB’s publically available complaint database is a powerful resource for identifying key issues. Companies like Beyond the Arc can analyze this data and combine it with census data to uncover pain points for taking targeted action to help improve customer experience and reduce regulatory risk.

– See more at: http://beyondthearc.com/blog/2014/customer-experience/student-loan-complaints-concentrated-on-the-east-coast#sthash.TDL21V9H.dpuf