CFPB Issues Student Loan Servicing Supervisory Highlights Special Edition

The CFPB recently issued a special edition of its Supervisory Highlights that focuses on the agency’s findings from its student loan servicing examinations.  This special edition follows the CFPB’s announcement in January that it specifically would examine post-secondary, for-profit colleges that make and service student loans. 

In the Supervisory Highlights, the CFPB stated that, as part of its examinations, it found that some university lenders were improperly withholding student transcripts pending loan payments.  In addition, it appears that some university lenders withheld transcripts of delinquent borrowers even after such borrowers had paid for the transcript.  The CFPB noted that it is an abusive practice under the Consumer Financial Protection Act for such universities to withhold student transcripts until payments are made. 

Additionally, the CFPB stated that in examinations of some federal loan servicers, it found that access to certain loan relief programs was obstructed.  The affected relief programs include: teacher loan forgiveness, public service loan forgiveness, and income-driven repayment. 

Examiners found that certain servicers incorrectly denied teacher loan forgiveness to borrowers even after completing the requisite five years of teaching and working at a qualifying school.  The CFPB noted that one servicer denied these applications if the employment dates were formatted incorrectly in the applications.

Regarding the public service loan forgiveness program, examiners found that certain servicers wrongfully approved and denied applications, delayed application processing, and made false statements about borrowers’ eligibility for the program.  And at least one servicer incorrectly informed borrowers that they must continue to make payments throughout the pandemic to qualify for public service loan forgiveness even though the CARES Act had suspended required payments. 

Further, the CFPB found that servicers improperly denied borrowers from participating in income-driven repayment plans, often based on the servicers improper calculations of the borrower’s income and debt, and that servicers mishandled renewals under this program during the CARES Act payment suspension.  The CFPB noted that the servicers engaged in unfair, deceptive, or abusive practices by depriving borrowers of loan relief programs.