President Joe Biden’s top consumer watchdog said it is cracking down on bad behavior by student loan companies that is hurting some borrowers’ chances for forgiveness.
Last week, the Consumer Financial Protection Bureau (CFPB), headed by Rohit Chopra, released a newsletter detailing how it will monitor the actions of student loan companies for debt forgiveness. In particular, the agency oversees how companies inform borrowers of recent reforms to the Public Service Loan Forgiveness Program (PSLF), which forgives public servants’ student debt after ten years of qualifying payments.
Prior to Biden’s presidency, the program ran a 98% refusal rateand the CFPB is stepping up its monitoring of businesses to ensure that borrowers are no longer misinformed about the program.
“Illegal conduct by a student loan officer can be ruinous for borrowers who miss the opportunity to cancel their debt,” Chopra said in a statement. “We will work closely with the U.S. Department of Education to ensure that public service loan cancellation pledges are honored.”
The agency wrote that over the past few years it has found that companies “have made misleading representations to borrowers about their ability to become PSLF-eligible”, and that failure to provide accurate information has misled borrowers and resulted in tens of thousands of dollars in student debt. which should have been cancelled.
But things seem to be changing for borrowers who have struggled to get relief from the program. Consequently announced reforms in October, the Ministry of Education temporarily allows ineligible past payments to qualify for the PSLF through a waiver, and over 70,000 borrowers have so far seen their student debt wiped out.
Richard Cordray, Head of Federal Student Aid wrote on Twitter last week that the aid already delivered is “the tip of the iceberg”. To ensure that borrowers can continue to reap the benefits, the CFPB said it will pay close attention to whether student loan companies provide accurate waiver information and ensure that the waiver is promoted to all borrowers who may be eligible.
“We want to ensure that every borrower who could qualify for the PSLF waiver has the opportunity to do so, and giving borrowers accurate and timely information about their eligibility is critical,” said Education Secretary Miguel Cardona, in a statement.
The Pennsylvania Higher Education Assistance Agency (PHEAA), the student loan company that administers the PSLF announcement in November, he would extend his contract for a further year to allow affected borrowers time to transition smoothly to a new company. However, PHEAA is rife with controversy and has been criticized by lawmakers like Massachusetts Senator Elizabeth Warren, who said the company has a “atrocious disc” trick borrowers into taking on more debt than they can repay.