The Consumer Financial Protection Bureau highlighted its observations of the resumption of federal student loan payments by consumers after more than three years of a payment moratorium due to COVID-19 in a report released on January 5, 2024. The report, titled “Issue Spotlight: Federal Student Loan Return to Repayment,” highlights several issues it maintains are confronting consumers, including extended call hold times, processing delays in income-driven repayment applications, and inaccurate billing and disclosure statements.

Findings in the report include:

• Long hold times and abandoned calls: The CFPB alleges that borrowers are frequently forced to wait on hold for more than an hour when calling their servicer, and many give up without ever receiving assistance. According to the Bureau, student loan servicers have not met the increased demand for borrower assistance after staffing reductions were made during the pandemic. The report states that average call wait times to speak to a live representative have risen from 12 minutes in August 2023 to over 70 minutes in October 2023. As a result, roughly half of all calls were abandoned in October 2023, more than double August 2023’s rate of 17%.
• Significant delays in processing income-driven repayment plan applications: As of late October, servicers reported more than 1.25 million pending income-driven repayment plan applications – with more than 450,000 of those applications pending for more than 30 days with no resolution. Processing times vary across servicers, with some servicers taking five times longer than others to process applications.
• Inaccurate and untimely billing statements: According to the report, borrowers are receiving inaccurate billing statements. Errors include listing premature due dates before the end of the payment pause, inflating monthly payment amounts due to the servicer using outdated poverty guidelines, or using the incorrect income when calculating a borrower’s new income-driven repayment plan payment.
  On the day the report was released, the Department of Education (“ED”) announced that it was withholding contractual payments to three federal student loan servicers, alleging they failed to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment. As part of that action, ED will suspend payments and interest on the accounts of impacted borrowers.

The CFPB states that it is releasing these aggregate anonymized observations because of the extent of the risk of harm to consumers and the significance of the ongoing issues examiners have found. According to ED, more than 28 million borrowers are returning to repayment. In November, ED issued a “Framework for Student Loan Servicer Oversight and Accountability to Protect Borrowers“ and indicated that “[t]he framework’s strategies help the Department to encourage servicers to better support borrowers and allows the Department to hold their feet to the fire when they have servicing failures.”

Missing in the finger pointing by the CFPB and ED is the inevitability of these type of issues in resuming repayment for 28 million borrowers after a three year pause and staffing issues that, while noted by the CFPB, are directly tied to cuts in ED funding to the servicers due to the pause. Notably, a fact sheet for consumers titled “What Borrowers Should Know About the Resumption of Federal Student Loan Payments,” issued by the Student Loan Servicing Association (“SLSA”) on August 1, 2023 prior to the resumption, included a prescient warning:

“Note: The influx of millions of borrowers simultaneously entering or re-entering repayment may make call hold times and processing times longer than usual. Please reach out to your Servicer early and ask questions today. Keep an eye out for communications you’ll be receiving from ED and your Servicer. You can be proactive and leverage chat functions and web calculators in addition to phone and email outreach to your servicer.”

In an interview with The New York Times last week, Scott Buchanan, SLSA’s executive director, said, “This is exactly what we said would happen when the government doesn’t have an operational plan, keeps changing it, does that at the last moment and doesn’t provide enough resources. And then everyone is shocked, shocked. It reminds me of ‘Casablanca.’”

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