As the Biden administration’s expansion of a key student loan forgiveness program kicks into high gear, federal regulators are beginning to hear complaints from borrowers about service agents misleading them on the news program requirements. And at least one administration official is warning loan officers that there could be serious consequences if the misconduct continues.
Here is the latest.
Expansion of student loan relief for public service workers
Last October, President Biden used executive action to temporarily ease key eligibility requirements for the Public Service Loan Relief Program (PSLF). PSLF offers federal student loan forgiveness to borrowers who dedicate their careers to nonprofit or government work. PSLF had restrictive rules that limited relief to certain types of federal student loans that were repaid under specific types of repayment plans based on the borrower’s income. These rules were not always well communicated to borrowers and as a result, PSLF was plagued with abysmal approval rates of around 2% or less.
Under the new expansion, which the administration is calling the “Limited PSLF Waiver” program, restrictive rules on federal loan types and eligible repayment plans are being relaxed for one year, through Oct. 31, 2022. Already , the department reported that $5 billion in new student loan forgiveness has been issued to 70,000 borrowers under this waiver program.
But many borrowers will need to act on their student loans to receive relief. Borrowers with Federal Perkins Loans and Federal Student Loans issued under the Federal Family Loan for Education (FFEL) program may have to consolidate their loans through the Federal Direct Consolidation Loan Program. And borrowers who have not certified their government employment through a specific PSLF application form should do so. There is also a limited time to act — the deadline is October 31, 2022.
Repairers may mislead borrowers on PSLF waiver
Last month, student loan advocacy organizations issued a stern warning that student loan servicers – contracted companies that handle student loan operations on behalf of the US Department of Education and other lenders – could mislead borrowers about the further expansion of the PSLF under the waiver.
“A review of industry practices … revealed that many of these companies are currently providing misleading and outdated information to borrowers, which could derail efforts to access relief under the recently revamped forgiveness program. public service loans,” the Student Borrower Protection Center (SBPC) said. ) in a press release in December.
The worries seem to have only gotten worse. Yesterday, Rohit Chopra, director of the Federal Consumer Financial Protection Bureau (CFPB) – an independent agency responsible for regulating the financial services industry – reported that complaints are pouring in from borrowers who receive misinformation about the Limited PSLF program. Waiver, or who get entirely barred from getting relief under the program.
“The @CFPB hears stories from student borrowers about how their agents are blocking their attempts to access the new PSLF fix,” Chopra said in a Tweeter. “Services that fail to provide adequate information, support or treatment for PSLF will suffer the consequences. @CFPB will continue to monitor the industry for illegal practices to ensure that our country’s public servants get the relief they deserve.
The CFPB has powerful regulatory tools, including the ability to sue loan servicing companies.
Loan servicing companies have a long history of mismanaging the civil service loan forgiveness program. Even before Biden’s recent expansion of the program, the CFPB released a report last year that criticized PSLF loan servicing practices; investigators “found a number of ways student loan officers gave borrowers incorrect information, resulting in missteps that could cost consumers thousands of dollars,” including tricking borrowers into “believing they could not access the PSLF if they had older loans under the Federal Family Education Loan Program (FFELP), although they could access the PSLF by consolidating the FFELP loans into direct loans. Repairers also missed the initial rollout of the limited PSLF waiver in the fall, leading to erroneous denials.
Several loan service companies, including FedLoan Servicing (the contracted loan service specifically designated by the Department of Education to administer the PSLF program) have accused Congress of creating the PSLF’s convoluted eligibility criteria by first place, and the Department of Education for being slow to provide sufficient guidance, especially under the new waiver.
Borrowers complain to the CFPB about erroneous PSLF determinations by loan servicers, misinformation about program requirements, and extremely long wait times to speak with customer service representatives.
“The Service Agent’s failure to provide the information, assistance and treatment that consumers need to access the PSLF Limited Waiver is not acceptable,” the CFPB said in a statement. declaration on the agency’s blog. “CFPB is committed to monitoring the industry for illegal practices and ensuring that public service employees, many of whom are on the front lines of the pandemic, can access the relief they deserve through the PSLF. »
What can student borrowers do?
Borrowers applying for student loan forgiveness through the PSLF, including under the PSLF Limited Waiver Program, have several options:
- First, take the time to learn about the program requirements and rules of the PSLF Limited Waiver. The Ministry of Education has established a detailed website.
- Borrowers who believe they have received an incorrect decision on student loan forgiveness from their loan servicer may file a official complaint to the United States Department of Education.
- The CFPB also encourages borrowers to file a complaint directly with that agency to report misrepresentations and other service misconduct.
Further Reading on Student Loans
Student Loan Forgiveness Updates: New Changes Coming in 2022 for Public Service Borrowers
Biden could ‘make a decision now’ on student loan forgiveness, says key senator
Biden administration touts $15 billion in student loan forgiveness for 675,000 borrowers – more to come?
Navient Student Loan Settlement: Who Qualifies for Relief and What to Do