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.