Borrowers with student debt ‘regularly’ got wrong information from servicers, CFPB finds

Consumer Protection Office. Bill Clark / CQ-Roll Call, Inc via Getty Images

• The Consumer Financial Protection Bureau found that student loan providers routinely mislead borrowers.

• Misleading practices include misrepresenting eligibility for the Public Service Loan Program.

• Biden has campaigned to fix the program but is still 98% of borrowers rejecting it.

• Check out Insider’s business page for more stories.

President Joe Biden’s Department of Education has begun reforming the student credit system. However, new findings from an agency in his government underscored the urgent need to implement reforms.

The Consumer Financial Protection Bureau (CFPB), which ensures fair treatment of consumers, released a report Tuesday that found that loan service providers misled borrowers under the Federal Family Education Loan Program (FFELP) who had tried to enroll in the Public Service Lending (PSLF) program.

FFELP ended in 2010, but according to the Department of Education, 11.2 million borrowers under this program have outstanding loans totaling over $ 248 billion.

PSLF also allows public sector employees to waive loans after 120 qualifying monthly payments, but the program has persistent shortcomings and CFPB noted that “Service Providers routinely provided inaccurate information about eligibility for PSLF or direct consolidation loans, resulting in fraudulent activity or practices ”. This hampered the borrowers’ ability to obtain debt relief.

According to the agency, one of the fraudulent practices is for borrowers to present employer credentials prior to consolidating their loans, despite the fact that PSLF guidelines state that it is precisely these types of filings that are refused. They also notified FFELP borrowers that their loans were not eligible for PSLF, but that these borrowers would be eligible if they consolidated their loans.

Other misleading practices that the CFPB identified were:

• Misrepresentation of employer’s eligibility requirements for the program;

• Failure to reverse the consequences of automatic inclusion in natural disaster tolerance;

• And implementing inaccurate monthly payments for borrowers after transferring them to new service providers.

Student Borrower Protection Center executive director Seth Frotman said in a statement that the CFPB’s findings “confirm that the student loan industry is involved in a widespread, illegal program to defraud civil servants of the lending they make through theirs Service to our country and in our communities. “

The story goes on

Biden campaigned for reform of the PSLF, but Insider reported that data from the Department of Education shows that 98% of borrowers have still been rejected from the program since he took office.

With regard to borrowers under the FFELP, Education Minister Miguel Cardona announced in March that he was extending the break in federal student loan interest and recoveries on all defaulted loans to FFELP borrowers whose loans are held by private lenders, which is around 1.14 million borrowers.

However, the agency’s results underscored the need to provide further relief for borrowers and to address the flawed student loan system.

The Student Borrower Protection Center wrote on Twitter: “Today’s action by @CFPB leaves no doubt: @SecCardona must use the extensive powers it already has to deliver the promised forgiveness to teachers, nurses and other public service workers across the country to grant. “

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source https://collegeeducationnewsllc.com/borrowers-with-student-debt-regularly-got-wrong-information-from-servicers-cfpb-finds/