CFPB Blasts FedLoan Servicing for Sucking at Managing PSLF Program

Another great article out from Danielle Douglas-Gabriel at WaPo on the CFPB finding about the Public Service Loan Forgiveness program.

“In some instances, people said the servicing company provided an inaccurate count of all their qualified payments and gave them a hard time as they fought to have the error corrected. Borrowers must also submit a certification form verifying their income and family size to remain enrolled in the forgiveness program, but during that process some say they are placed into forbearance that prevents them from making qualifying payments.

Of the 8,500 complaints the bureau reviewed from March 2016 to February, 10 percent of them involved the loan forgiveness program.”

The report was very critical of the PSLF program failues by the servicer. For example, “For certain populations of borrowers, servicers are aware that they work in public service, yet borrowers complain that servicers do not proactively inform them of their eligibility for PSLF. In particular, complaints from military borrowers indicate they may not be receiving information about PSLF at a time when they can be making substantial progress towards the qualified payment requirement. For example, one borrower reported that his servicer did not explain that his loans were not eligible for PSLF until after years of military service. The borrower was only informed that he needed to consolidate his loans to become eligible for PSLF after he left the military due to a service-related injury.”

I was told that none of my active military service, including deployments to Afghanistan, would count for PSLF purposes. This is a slap in the face to all Veterans. PSLF is supposed to provide reward those who serve the public. . . . [M]y military service, in which my leg function was sacrificed, did not count for anything [toward PSLF]. This is contrary to the alleged policy for which the PSLF program was created and it is insulting.

One very interesting point in the report concerned making sure employment was approved and qualified towards eventual forgiveness under PSLF.

“In 2016, the Department of Education began publishing data relating to ECFs [Employment Certification Forms] submitted by federal student loan borrowers. This data shows that approximately 533,000 student loan borrowers had approved ECFs on file with the Department of Education by the end of 2016. The data also shows that each year, approximately one-third of borrowers are denied employer certification, most commonly due to errors on the submitted form.”

The denial of employment can create unnecessary problems for borrowers. The report says, “Borrowers who believe their employment qualifies for PSLF report that their servicer may deny their ECF without enough information about the reason for the denial so that the borrower may take action. Borrowers report being unsure on whether there was an error on the application, an inability of the servicer to confirm borrowers’ employment information, or a servicer error in processing the application.”

Another common gotcha student loan debtors complain about is a big one. Debtors complain ” If a borrower consolidates his or her individual Direct Loans into a consolidation loan, any payments made towards PSLF will be lost.” That sucks.

Steve Rhode

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

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