In conjunction with its public event yesterday on student loan servicing, the CFPB issued a new report, “Staying on track while giving back.” The report, which provides a mid-year update on student loan complaints, highlights complaints from borrowers seeking to access federal law protections for borrowers working in the public service arena, particularly the Public Service Loan Forgiveness (PSLF) program. The report analyzes complaints submitted by consumers from March 1, 2016 to February 28, 2017.
During the period covered by the report, the CFPB handled approximately 7,500 private student loan complaints, approximately 11,500 federal student loan complaints, and 2,200 debt collection complaints related to private and federal student loans. In February 2016, the CFPB began accepting complaints about federal student loans. Previously, such complaints were directed to the Department of Education. The report states that “over the past 12 months, the Bureau saw a 325 percent increase in student loan complaints.” While noting that the CFPB “also began handling complaints” about federal student loans prior to the period covered by the report, the report does not connect the increase to this change. As a result, readers are likely to assume that the increase in student loan complaints reflects an increase in the number of borrowers making student loan complaints and may not observe that the increase in student loan complaints most likely reflects the change in where such complaints were sent.
The PSLF program provides loan forgiveness to borrowers who work full-time for a qualified employer and meet certain other eligibility requirements. “Qualified employers” include a federal, state, local, or tribal government and certain non-profit organizations. Because the PDLF program was launched in 2007 and a borrower must also make 120 qualifying payments (i.e. 10 years of payments) to be eligible, the ED will begin accepting applications from borrowers seeking PSLF forgiveness in October 2017. Other eligibility requirements are that the borrower must have one or more Direct Loans and be enrolled in a qualified repayment plan. With regard to each eligibility requirement, the report discusses various servicing-related problems reported by borrowers that impacted a borrower’s ability to meet that requirement.
For example, with regard to the Direct Loan eligibility requirement, the report discusses borrower complaints about delays and defects in the process of consolidating loans not eligible for PSLF into an eligible Direct Consolidation Loan. With regard to the qualified employer eligibility requirement, the report discusses problems encountered by borrowers in completing employer certification forms or in learning the reason for denial of an ECF. With regard to the requirements for a borrower to be enrolled in a qualified repayment plan (which primarily consist of income-driven repayment (IDR) plans) and make 120 qualified payments, the report discusses borrower reports of lost IDR enrollment as a result of delays in processing IDR recertification paperwork and payments being deemed non-qualifying because the servicer had advanced payment due dates when excess payments were received. The report also includes a series of recommendations for policymakers and student loan industry participants to address the problems reported by borrowers in accessing the PSLF program and other federal law protections.
In addition to issuing the report, the CFPB updated its “Education Loan Examination Procedures.” The Student Loan Servicing module (Module 3) includes a description of the PSLF program and directs servicers to look at a servicer’s policies and practices related to PSLF programs such as the accuracy and adequacy of information provided to borrowers about PSLF, steps taken when a borrower expresses interest in PSLF, providing information to subsequent servicers and collecting information from prior servicers, and determining whether a payment is a qualifying payment under various scenarios.
The CFPB also launched a consumer education campaign for student loan borrowers working in public service and released a toolkit for public service employers to use in assisting employees qualify for the PSLF program.
