The Consumer Financial Protection Bureau (CFPB), a federal watchdog agency that oversees the financial services industry, has fined a major student loan servicer $1 million for allegedly misleading borrowers about the cancellation of student loans. Here is an overview.
Student loan officer fined for allegedly misrepresenting student loan forgiveness program
The CFPB imposed the fine on EdFinancial Services, one of the main loan service companies contracted by the Ministry of Education. EdFinancial is playing an increasingly important role in the federal student loan servicing system by taking over hundreds of thousands of borrower accounts from FedLoan Servicing, another contracted loan servicer that is in the process of withdrawing from the system. federal student aid.
The CFPB accused EdFinancial of misleading borrowers about the Public Service Loan Forgiveness (PSLF), a federal loan forgiveness program for borrowers who have dedicated their careers to nonprofit organizations or public. The Biden administration recently expanded PSLF eligibility through the “Limited PSLF Waiver” program, which will temporarily allow prior repayment periods that have been waived (for example, due to payments made on the “wrong” type). federal loan or the “wrong” type of federal loan). type of repayment plan), to potentially qualify for loan forgiveness.
According to the CFPB, EdFinancial misled borrowers about their PSLF eligibility, including under the limited PSLF Waiver program. “When borrowers with FFELP loans inquired about the PSLF, Edfinancial in many cases told them they were not eligible, and the company did not tell them they could become eligible by consolidating their loans into direct loans and fulfilling other eligibility requirements,” the CFPB said. in a statement Wednesday summarizing its decision to sanction the company.
“Edfinancial’s failure to tell borrowers the full truth, so it can inflate its results, highlights a systemic problem with loan servicing,” CFPB Director Rohit Chopra said in a statement. . “When student loan companies lie about forgiveness and repayment programs for borrowers, they are breaking the law.”
EdFinancial has not published a public response to the CFPB action on its website or on social media. However, the main borrower portal on its website includes an “Important Public Service Loan Forgiveness Update” tab, which reads: “The U.S. Department of Education (ED) has announced a temporary change to the rules of the Loan Forgiveness Program (PSLF) under the limited PSLF exemption! Now, for a limited time, borrowers can get credit for past repayment periods that would not normally qualify for the PSLF. The bulletin directs borrowers to access the Ministry of Education website on the program. It is unclear when EdFinancial’s website was updated to include this message.
CFPB crackdown follows earlier warnings about student loan servicers misleading borrowers
The CFPB last month warned student loan servicers not to mislead borrowers about loan forgiveness or risk penalties.
“Through its oversight of student loan servicers, the CFPB found that servicers were making misleading representations to borrowers about their ability to become PSLF-eligible,” the agency said in a February bulletin. “When managers fail to provide accurate and complete information, they mislead borrowers about their ability to qualify for PSLF, which can lead to tens of thousands of dollars in loan repayments that should have been cancelled.”
“Illegal conduct by a student loan officer can be ruinous for borrowers who miss the opportunity to cancel their debt,” CFPB Director Rohit Chopra said in a statement accompanying this bulletin. “We will work closely with the U.S. Department of Education to ensure that public service loan forgiveness pledges are honored.”
The CFPB crackdown on EdFinancial follows an independent settlement agreement between multiple state attorneys general and Navient — another major student loan servicer — to address allegations of unfair and deceptive practices and predatory lending. This settlement agreement includes cancellation and restitution of student loan debt for thousands of borrowers. Navient has admitted no wrongdoing in connection with this settlement agreement.
Learn more about recent changes to the Civil Service Loan Relief
Borrowers interested in the PSLF program, including the new limited PSLF waiver, should be proactive in learning about the program requirements to reduce the risk of being misled by their loan servicers. And borrowers who believe they have been misled or wrongly denied assistance may have some options:
- The Department of Education has created a detailed program requirements website for the PSLF Limited Exemption Program.
- Borrowers can also use the ministry’s PSLF help tool to check if their job may qualify for the program.
- Borrowers who believe they have been misled by their loan servicer about PSLF or any other student loan program can file a complaint with the CFPB, which may trigger an investigation.
- Borrowers who have received an erroneous PSLF determination (such as a denial of forgiveness or an incorrect payment statement) may file a formal complaint and request a review with the Department of Education’s Feedback Division or Ombudsman Panel. The ministry also said it will put in place a review and appeal process for the PSLF next month.
Further Reading on Student Loans
Navient Student Loan Settlement: Who Qualifies for Relief and What to Do
Extend the pause on student loans until 2023? Biden can do it.
Biden could extend student loan suspension and plans to forgo loans, White House official says
Thousands of Jobs Qualify for Expanded Student Loan Forgiveness Program