Student loan borrowers are reporting that loan servicers are "mishandling" the Public Service Loan Forgiveness program, according to the Consumer Financial Protection Bureau. The CFPB has published a report on the costs to those in the public service industry when the program fails them. The bureau also updated its education exam procedures and unveiled the "Certify Your Service" campaign. The campaign is intended to help public servants stay on track for federal loan forgiveness, the bureau said.
"More than 500,000 people have signaled their intention so far to pursue debt relief under this program," CFPB Director Richard Cordray said in prepared remarks for a Public Service Student Loan Forgiveness event in Raleigh, N.C. on June 22. "According to the Department of Education, almost two-thirds of them earn less than $50,000 per year. And 86 percent earn less than $75,000 per year. Many are in public service careers, such as military service or social work, with no real private sector equivalent."
Loan forgiveness program. The public service loan forgiveness program, launched in 2007, is meant to encourage people to enter public service despite increasing levels of student loan debt. To be eligible, borrowers: must have a qualifying loan; be enrolled in a qualifying repayment plan, such as an income-driven repayment plan; and make 120 on-time payments while working for a qualified public service employer. Student loan servicers are responsible for administering these requirements. However, student loan borrowers have reported that servicers delay or deny access to loan forgiveness through wrong information about their loans, flawed payment processing, and "bungled" job certifications, according to the bureau.
Report on servicing breakdown costs. The CFPB released a report on the cost of student loan servicing breakdowns for people serving their communities. Evidence suggests that many professions in this segment of the workforce typically require advanced levels of education and that education requirements in many of these fields have increased over time. While the public broadly shares the benefits of a highly educated professional workforce serving in their communities, often the financial costs of these new credentials fall on individuals in careers with limited opportunity for wage growth to offset these costs. The loan forgiveness protections were intended to ensure that nurses, teachers, first responders, and other public servants can serve their communities without it being to their long-term financial detriment.
Examination manual. The CFPB updated its exam procedures to prioritize its supervision of potentially illegal practices used by student loan servicers to administer loan forgiveness benefits. Bureau supervision examinations will look at whether servicers: tell eligible consumers what they need to do to qualify for forgiveness; warn consumers who believe they are on track to qualify when they are not; provide clear information about the loan forgiveness program; and accurately evaluate borrowers’ eligibility and progress toward loan forgiveness. According to the bureau, this will be part of the CFPB’s regular oversight of these companies’ compliance with federal consumer law.
Blog posts. Finally, the CFPB posted information for consumers to its blog. Consumers can access guides to the public service loan program and learn how to stay on track when working within the program.
MainStory: TopStory CFPB CommunityDevelopment Loans NorthCarolinaNews OversightInvestigations
Interested in submitting an article?
Submit your information to us today!Learn More
Banking and Finance Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.