Consumer watchdog for President Biden has disclosed he is cracking down on bad acts by student loan companies that threaten borrowers’ chances of getting forgiven.
The Consumer Financial Protection Bureau (CFPB), led by Rohit Chopra, issued a bulletin laying out its plan to monitor how student loan companies handle debt forgiveness. Additionally, the agency monitors how companies inform borrowers about reforms to the Public Service Loan Forgiveness program, which forgives public servants’ student loans after they make qualifying repayments for ten years, Businessinsider reported.
Before Biden’s election, the program had a 98% denial rate, and the Consumer Financial Protection Bureau is now scrutinizing company practices to ensure that borrowers are no longer misinformed about the program.
“Illegal conduct by a student loan servicer can be ruinous for borrowers who miss out on the opportunity for debt cancellation,” Chopra stated.
“We will be working closely with the U.S. Department of Education to ensure that loan cancellation promises for public service are honored.”
The agency stated that over the past few years, companies have “made deceptive statements to borrowers about their ability to become eligible for PSLF,” leaving some borrowers in the dark and resulting in several tens of thousands of dollars of student debt that should have been discharged.
The situation seems to be improving for borrowers who have struggled to get relief through the program. As a result of announced reforms declared openly in October, the Education Department has temporarily waived past numerous ineligible payments. Over 70,000 students have had their student debt forgiven so far.
Richard Cordray, the head of the Federal Student Aid office wrote on Twitter last week that the relief already delivered is “the tip of the iceberg.” To ensure that students keep receiving the benefits, the CFPB will ensure that student-loan companies provide accurate information about the waiver and that it is advertised to all borrowers who might qualify for it.
“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 education secretary Miguel Cardona.
The Pennsylvania Higher Education Assistance Agency (PHEAA) announced in November that it would extend its contract for one year more so that borrowers could transition smoothly to a new company. PHEAA, however, has been dogged by controversy and has been criticized by lawmakers including Massachusetts Sen. Elizabeth Warren. She said the agency has an “atrocious record” of making consumers take on more debt than they can handle.
The CFPB has previously taken action against student-loan companies. According to the agency, in July, companies collecting debts “regularly” provided inaccurate information to borrowers, including misrepresenting PSLF requirements.