On February 18, 2022, the Consumer Financial Protection Bureau (CFPB) issued a Compliance Bulletin and Policy Guidance (Bulletin) regarding the servicing of Federal student loans for borrowers who may be eligible under the recently-issued Public Student Loan Forgiveness (PSLF) Waiver. The CFPB announced that it will be closely reviewing student loan servicer conduct for potential unfair, deceptive or abusive acts and practices in connection with student loan forgiveness as certain program deadlines near.
Working closely with the U.S. Department of Education, the CFPB said it “plans to prioritize” oversight of student loans in the coming year, with a “specific focus” on monitoring how loan services are engaging with Federal student loan borrowers about public service loan forgiveness.
“We want to make sure that every single borrower who could benefit from the PSLF Waiver has the chance to do so, and giving borrowers accurate and timely information about their eligibility is critical,” said U.S. Secretary of Education Miguel Cardona. “I appreciate the CFPB’s partnership in holding servicers accountable for their role in helping borrowers access loan forgiveness under PSLF.”
In 2007, Congress enacted legislation to provide loan cancellation for borrowers working in an eligible public service job. For public service employees with Direct Loans, PSLF cancels the remaining balance on those loans after they make 120 loan payments while working for a qualifying employer. According to the Bulletin, an estimated 1.3 million borrowers qualify for PSLF but are not making progress toward relief. Through its supervision of student loan servicers, the CFPB claims to have found that servicers made inaccurate and deceptive statements to borrowers about their ability to become eligible for forgiveness under PSLF.
In October 2021, in response to the COVID-19 national emergency, the Department of Education announced a temporary easing of some PSLF program requirements to help many previously ineligible borrowers receive forgiveness based on their qualifying public service employment regardless of their loan type or repayment plan. The PSLF Waiver allows borrowers with Federal Family Education Loan Program (FFELP) and Perkins loans to consolidate into a Direct Loan and receive credit toward loan forgiveness under PSLF for periods of repayment on earlier loans. It also provides the same benefit to existing Direct Consolidation Loan borrowers resulting in the forgiveness of tens of thousands of borrowers’ loans automatically. The PSLF Waiver credits any month that a Federal student loan borrower worked in public service and was in active repayment towards the 120 payments required for PSLF. In order to benefit from the PSLF Waiver, borrowers will need to take action before it closes on October 31, 2022.
In stepping up its enforcement and supervision of loan servicers, the CFPB intends to focus on whether:
- Servicers of any federal loan type provide complete and accurate information about the PSLF Waiver when discussing PSLF or loan consolidation in any communications;
- Servicers have adequate policies and procedures to recognize when borrowers are expressing interest in PSLF or the PSLF Waiver, or where their files otherwise demonstrate their eligibility, and to direct those borrowers to appropriate resources; and
- Servicers take steps to promote the benefits of the PSLF Waiver to borrowers who express interest or whose files otherwise demonstrate their eligibility.
Student loan servicers should consider enhancing their compliance management systems to ensure that policies and procedures are put into place so that they do not misrepresent borrower eligibility or make deceptive statements to borrowers about the PSLF program or the PSLF Waiver.