CFPB Strengthens Oversight of Student Loan Officers | Goodwin
On February 18, 2022, the Consumer Financial Protection Bureau (CFPB) issued a Compliance Bulletin and Policy Guidelines (Bulletin) regarding the servicing of federal student loans for borrowers who may be eligible under the recently issued Public Student Loan Forgiveness (PSLF) waiver. The CFPB has announced that it will closely examine the conduct of student loan servicers for possible unfair, deceptive or abusive acts and practices in connection with the cancellation of student loans near certain program deadlines.
Working closely with the U.S. Department of Education, the CFPB said it “plans to prioritize” monitoring student loans over the coming year, with a “particular emphasis” on monitoring how loan services interact with federal student loan borrowers regarding the cancellation of public service loans. .
“We want to make sure that every borrower who could qualify for the PSLF waiver has the opportunity to do so, and giving borrowers accurate and timely information about their eligibility is critical,” the U.S. Secretary of Education said. Miguel Cardona. “I appreciate the CFPB’s partnership in holding managers accountable for their role in helping borrowers access loan forgiveness under the PSLF.”
In 2007, Congress enacted legislation providing loan forgiveness for borrowers working in eligible public service employment. For public service employees with direct loans, PSLF cancels the remaining balance on these loans after making 120 loan payments while working for an eligible employer. According to the Bulletin, about 1.3 million borrowers are eligible for PSLF but are not progressing to relief. Through its oversight of student loan servicers, the CFPB claims to have found that servicers made inaccurate and misleading representations to borrowers about their ability to become eligible for remission under the PSLF.
In October 2021, in response to the national COVID-19 emergency, the Department of Education announced a temporary relaxation of some PSLF program requirements to help many previously ineligible borrowers receive a discount based on their employment in the eligible public service, regardless of their loan type or repayment plan. . The PSLF waiver allows borrowers with the Federal Family Education Loan Program (FFELP) and Perkins loans to consolidate into a direct loan and receive loan forgiveness credit under the PSLF for periods repayment of previous loans. It also offers the same benefit to existing borrowers of direct consolidation loans, which automatically results in the cancellation of tens of thousands of borrower loans. The PSLF waiver credits each month that a federal student borrower worked in the public service and was in active repayment for the 120 payments required for PSLF. In order to benefit from the PSLF waiver, borrowers will need to take action before it closes on October 31, 2022.
In strengthening its enforcement and oversight of loan servicers, the CFPB intends to focus on whether:
- Servicers of any type of federal loan provide complete and accurate information about the PSLF waiver when discussing the PSLF or loan consolidation in all communications;
- Services have adequate policies and procedures to recognize when borrowers express interest in PSLF or PSLF waiver, or when their records otherwise demonstrate eligibility, and to refer such borrowers to appropriate resources; and
- Service agents take steps to promote the benefits of the PSLF waiver to borrowers who express an interest or whose records otherwise demonstrate eligibility.
Student loan servicers should consider improving their compliance management systems to ensure that policies and procedures are in place so that they do not misrepresent borrower eligibility or make misrepresentation to borrowers about the PSLF program or the PSLF waiver.