CFPB has released a report outlining the servicing failures by both federal
and private student loan borrowers. Consumers have expressed discontent
with the practices of many loan providers. These practices had created
obstacles to repayment, raise costs, and cause distress to the consumers.
CFPB Director Richard Cordray expressed his concerns about the current
student loan grievances stating, “With one out of four student loan
borrowers struggling to repay their loans or already in default, cleaning
up the servicing market is critical.”
A public inquiry was started by the CFPB in May of this year to determine
the practices that were the biggest obstacles to repayment of student
loans. During the inquiry period the Bureau received over 30,000 public
comments. Some of the problems reported included poor customer service,
roadblocks to refinancing, increase in fees and penalties, and lack of
assistance for struggling borrowers, including older Americans and veterans.
The report released by the CFPB provides recommendations for policymakers
and market participants to improve borrower outcomes and reduce defaults.
The recommendations include:
- Creating consistent, industry-wide standards for the entire servicing markets
to ensure quality service for all borrowers. This can help a borrower
access assistance and know what to expect during his repayment periods.
- Holding servicers accountable for errors and illegal behavior
- Providing access to clear, timely information that provides the borrower
with accurate information about repayment options and alternative payment plans.
- Improving publicly available data about performance of student loans and
utilization of specific repayment options.