Biden Watchdog Reveals Student Loan Company Fined $1 million for Lying About Loan Forgiveness
Borrowers with Federal Family Education Loans were misled about Public Service Loan Forgiveness by Edfinancial, according to the CFPB. The bureau has ordered Edfinancial to pay a $1 million fine and re-inform borrowers of their forgiveness options.
On Wednesday, the Consumer Financial Protection Bureau (CFPB) sanctioned Edfinancial Services for “making deceptive statements to student loan borrowers and misrepresenting their forgiveness and repayment options to them.”
Public Service Loan Forgiveness (PSLF) program forgives student debt for public servants after ten years, and Edfinancial failed to correctly inform FFEL borrowers about their eligibility for the program.
“Edfinancial’s failure to tell the full truth to borrowers, so it could pad its bottom line highlights a systemic problem with loan servicing,” CFPB Director Rohit Chopra stated.
“When student loan companies lie about cancellation and repayment programs for borrowers, they are breaking the law.”
A request for comment from Insider was not immediately answered by Edfinancial.
CFPB reported on Wednesday that Edfinancial misrepresented borrowers’ eligibility on reforms of PSLF, one of which included a waiver.
The bureau found Edfinancial “harmed” borrowers by:
Stating that FFEL borrowers could not receive PSLFMisrepresenting that FFEL borrowers were making payments toward PSLF before consolidating their loans into Direct loans a requirement to qualify for the forgiveness program misrepresenting which jobs qualify for PSLFAnd failing to mention PSLF to FFELb borrowers when describing loan forgiveness programs.
The CFPB is requiring Edfinancial to reach out to all FFEL borrowers to give them an opportunity to take advantage of the PSLF waiver before it expires, along with paying a $1 million penalty to the bureau’s Civil Penalty Fund.
Chopra stated that “Edfinancial is not a massive servicer, but its deceptive practices can have a massive impact on an individual borrower’s financial future,” which is why Federal Student Aid head Richard Cordray wrote a letter to borrowers following CFPB’s actions to bring the issues to “immediate attention” of every company that handles FFEL borrowers.
“We have no reason at all to think that these issues – which dated from at least January 2017 through at least February 2021 – were unique to EdFinancial. To the contrary, they may well reflect the longstanding approach to how others were handling these the same issues during the same period and perhaps even now,” Cordray wrote.
“FSA and CFPB can be expected to pursue further oversight of these issues, and every company should take pains to address them at once, so as to avoid penalties or other consequences,” he added.
Mike Pierce, executive director of the Student Borrower Protection Center, said to Insider that CFPB’s actions were “a long time coming,” and that all other student-loan companies will be facing increasing enforcement measures.
“There’s some language that feels a lot broader than just the single enforcement action or two that suggests that the CFPB is watching the whole student loan industry and watching its conduct far beyond just public service loan forgiveness, but really any place where student loan companies are cheating borrowers,” Pierce added.
