Once again, the Consumer Financial Protection Bureau is stepping in to do another federal agency’s job.
For months, the Education Department has been waffling on whether career public servants — teachers, firefighters, police officers — will be able to seek student loan forgiveness after 10 years of paying into the program. Now the CFPB is stepping in and doing three things:
- Highlighting consumer complaints about loan servicers mismanaging the program and suggesting policy fixes
- Issuing new guidelines for its own internal regulation of servicers
- Launching a campaign to help borrowers track their eligibility
Republicans will probably howl about the CFPB overstepping its bounds, but I’m OK with it. After all, Education Secretary Betsy DeVos felt the need to issue a press release about climate change, a subject her job has nothing to do with. It’s just another beautiful way the Trump administration works as a cohesive whole. We’re all in this together, right? Go team.
Stopping the runaround
The CFPB’s new report highlights 19,000 student complaints the agency got over the past year, plus additional student loan debt collection complains that bring the total over 20,000. The volume of complaints has more than tripled over the past year, the agency says. A lot of them are about student loan forgiveness, which will become available to the first group of eligible borrowers this October.
“Borrowers complained about servicers providing incorrect or inadequate information about their eligibility for loan forgiveness,” says CFPB chief Richard Cordray. “And they said they do not receive timely or accurate information about eligibility for this program, even when they identified themselves as public service workers.”
This kind of slapdash treatment can end up costing borrowers thousands extra. One of the highlighted complaints is from a nurse whose employer was paying extra toward her loans, putting them in “paid-ahead status.”
To get ahead, she kept making her own on-time, full payments — but they weren’t counted toward loan forgiveness. Her complaint said: “I find it outrageous and disheartening that by default, overpaying your bill each month would result in…disqualifying payments. This results in three years of additional payments, which is real money.”
She was literally punished for being a responsible borrower.
Borrowers also complained to the CFPB they were being placed into forbearance — typically an option when you temporarily can’t make payments — or military deferment and losing loan forgiveness credit when they made payments anyway. Some said processing delays and other errors caused payments not to be counted. Others got letters inaccurately saying they weren’t eligible for loan forgiveness, but without an explanation for the denial.
Roughly 5 percent of complaints about servicers Navient, Nelnet, and Great Lakes were about public service loan forgiveness. Complaints about PSLF were much more common at servicers ACS (11 percent) and the Pennsylvania Higher Education Assistance Agency (22 percent).
The report also offers pages of policy recommendations — a pretty clear acknowledgment from the CFPB that it can’t do everything, and it expects Congress to step up and put the Education Department in order.
All of these complaints also inform new guidelines the CFPB is giving its regulators to check that servicers are properly administering student loan forgiveness. They’ll check on the information servicers provide borrowers about qualifying for forgiveness and how they help borrowers track progress, and whether they’re accurately counting qualifying payments.
New guides for getting student loan forgiveness
The CFPB is also offering new guides on how to qualify for the Public Service Loan Forgiveness program specifically for first responders and teachers — it already has guides for military servicemembers and other public servants. Here is a list…
While they’re all modeled on the same template, each is tailored to the specific student loan options that group has and warns of potential conflicts in student loan benefits. For instance, military servicemembers can’t consolidate their loans for loan forgiveness and get an interest rate reduction through the Servicemembers Civil Relief Act. They’re practical and straightforward compared to most “guides” you get out of the federal government.
They’re also giving employers new tools to spread awareness of the forgiveness program.
Roughly one in four working Americans is in some kind of public service — and a lot of them do it for not much money. It often means moving to a poorer community because they need you most, or turning down a better-paying private sector job.
These people deserve the student loan forgiveness they were promised, and they shouldn’t have to fight for it. So until Trump and DeVos manage to shut down the forgiveness program, they should get out of the way and let the CFPB make it painless.
Article last modified on August 8, 2017. Published by Debt.com, LLC .