Today the Consumer Financial Protection Bureau (CFPB) released a bulletin detailing student loan servicers’ obligation to halt unlawful conduct regarding borrowers’ eligibility and benefits under the Public Service Loan Forgiveness (PSLF) Waiver. The bulletin recommends actions servicers should consider taking to ensure they do not misrepresent borrower eligibility or make deceptive statements to borrowers about the PSLF program and the Waiver.
“In its oversight, the CFPB will be paying particular attention to whether student loan servicers provide complete and accurate information to consumers about the benefits they can receive under the PSLF Waiver and eligibility for PSLF generally.”
“Illegal conduct by a student loan servicer can be ruinous for borrowers who miss out on the opportunity for debt cancellation,” said CFPB Director Rohit Chopra. “We will be working closely with the U.S. Department of Education to ensure that loan cancellation promises for public service are honored.”
“We want to make sure that every single borrower who could benefit from the PSLF Waiver has the chance to do so, and giving borrowers accurate and timely information about their eligibility is critical,” said U.S. Secretary of Education Miguel Cardona. “I appreciate the CFPB’s partnership in holding servicers accountable for their role in helping borrowers access loan forgiveness under PSLF.”
Student loan servicers are companies that manage student loan accounts. Student loan borrowers generally do not have the power to choose their servicer.
In 2007, Congress enacted legislation to provide loan cancellation for borrowers working in an eligible public service job. For public service employees with Direct Loans, PSLF cancels the remaining balance on those loans after they make 120 loan payments while working for a qualifying employer. Despite one government estimate that 1.3 million borrowers qualify for PSLF, the CFPB has documented how poor servicing practices have impeded many borrowers from making progress toward relief, such as by giving them inaccurate information about how they can become eligible for debt cancellation.
Through its supervision of student loan servicers, the CFPB has found that servicers made deceptive statements to borrowers about their ability to become eligible for PSLF. When servicers fail to provide accurate and complete information, they mislead borrowers about their ability to benefit under PSLF, which can lead to tens of thousands of dollars in loan payments that should have been cancelled.
In October 2021, the Department of Education announced the PSLF Waiver, which extended benefits to borrowers who had previously been shut out of the program—including due to not getting the information they needed about how they could become eligible for PSLF.
Under the Waiver, any past payment on a federal student loan by a borrower working in public service can count toward PSLF, regardless of payment plan, loan type, or whether the payment was made in full or on-time. This includes payments made through the Federal Family Education Loan (FFEL) and Federal Perkins Loan Programs, which did not previously count under the old PSLF rules. In order to benefit under the Waiver, many borrowers will need the assistance of their student loan servicer to take action by consolidating their loans, filing a PSLF application, or both, before the Waiver ends on October 31, 2022.
As servicers administer the new PSLF Waiver and assist borrowers, the CFPB expects servicers to comply with federal consumer financial protection laws. The CFPB plans to prioritize student loan servicing oversight work in deploying its enforcement and supervision resources in the coming year with a specific focus on monitoring engagement with borrowers about PSLF and the PSLF Waiver. The CFPB will pay particular attention to whether:
- Servicers of any federal loan type provide complete and accurate information about the PSLF Waiver when discussing PSLF or loan consolidation in any communications.
- Servicers have adequate policies and procedures to recognize when borrowers are expressing interest in PSLF or the PSLF Waiver, or where their files otherwise demonstrate their eligibility, and to direct those borrowers to appropriate resources.
- Servicers take steps to promote the benefits of the PSLF Waiver to borrowers who express interest or whose files otherwise demonstrate their eligibility.
To prevent unfair, deceptive, or abusive acts or practices, student loan servicers should consider enhancing their compliance management systems to develop and implement policies and procedures to ensure that all borrowers receive accurate and complete information about the PSLF Waiver and representatives facilitate their enrollment.
Time is of the essence since the PSLF Waiver closes at the end of October 2022. After the PSLF Waiver closes, direct payments to borrowers may be the primary means of remediating relevant violations.
The CFPB has used its law enforcement and supervisory authorities to address illegal student loan servicing practices. The CFPB’s enforcement work, including actions against Wells Fargo and Discover, has led to tens of millions of dollars in borrower refunds and penalties. The CFPB also sued Navient, the nation’s largest student loan servicer, for widespread violations in its student loan servicing business. The litigation is ongoing.