Six Democrat Senators sent a letter to the Consumer Financial Protection Bureau seeking information on its oversight of the student loan industry.
Specifically, the letter requested information on the activity of student loan companies and servicers involved in the administration of the federal Public Service Loan Forgiveness Program.
Implemented in 2007, the PSLF program promised loan forgiveness to certain student loans who made 10 years of on-time monthly payments while working in public service.
Actual implementation of the program, however, was riddled with problems. Most borrowers applying for the program have had their applications rejected, with just 206 out of more than 41,000 applicants receiving forgiveness as of September.
Many borrowers failed to understand paperwork, and the parameters of the program were poorly explained. Some legal actions, complaints and lawsuits brought by state law enforcement and individuals allege that some student loan servicers deliberately misled customers about their eligibility for or enrollment in PSLF. Under former director, Obama appointee Richard Cordray, the CFPB itself sued Navient, the country’s largest student loan company, over allegedly “failing borrowers at every stage of repayment.”
The senators’ letter referenced such lawsuits as well as multiple problems with the implementation of the PSLF program by the Education Department and by the servicing companies paid to administer the program. These include a September 2018 report from the Government Accountability Office recommending that the Education Department provide additional and better information to borrowers struggling to navigate the PSLF program.
“These reports raise numerous questions about the diligence of the oversight provided by the bureau,” the letter said. “In particular, we are concerned that CFPB leadership has abandoned its supervision and enforcement activities related to federal student loan servicers.”
The letter also raised the issue of authority for oversight of the industry. Under Obama appointees, the CFPB pursued oversight of all student loan servicers. After the administration change in 2016, however, newer Trump appointees have pulled back to focus on the much smaller private loan servicing industry.
The letter, signed by Senators Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Kirsten Gillibrand (D-N.Y.), Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Bob Menendez (D-N.J.) sought answers to a list of questions by April 23 focusing on PSLF, a CFPB investigation of servicer ACS, and the cessation of the CFPB’s information-sharing agreement with the Education Department.
Americans collectively owe $1.5 trillion in student loans, making it the second largest industry the CFPB regulates after mortgages.