Last week, the Consumer Financial Protection Bureau’s (“CFPB”) Student Loan Ombudsman released its midyear report analyzing complaints submitted directly by consumers about their student loans. Importantly, the CFPB’s Student Loan Ombudsman announced that it is now officially accepting complaints about federal student loans. Although it has actually been accepting federal student loan complaints for a few months now, this is the first time it is openly soliciting these complaints.
As this report shows, complaining can actually make a difference. The CFPB uses these complaints to inform its policy recommendations, supervision of student loan servicers and debt collectors, and enforcement actions. If you have applied for an income-driven repayment (“IDR”) plan in the past year, you may be familiar with some of the problems discussed in the report (and now you know you are not alone). The CFPB documented problems with delays in processing IDR applications and annual renewals. It also documented complaints about servicers rejecting complaints without giving borrowers an opportunity to fix mistakes or update documentation. These problems can be costly for borrowers. For example, if an error causes the borrower to miss an important deadline, any outstanding interest will be capitalized (meaning its added to the principle balance) resulting in the borrower paying more interest over time. In the worst case, processing problems can effectively prevent borrowers from accessing an affordable repayment option.
The CFPB’s report highlighted some key steps that the Department of Education (“ED”) and servicers can take immediately to improve servicing for borrowers. The CFPB urged servicers to engage with borrowers when there are problems in their IDR application instead of denying the application without explanation, and to improve communication more generally. The CFPB also created a form that servicers can use to communicate with borrowers who have problems with the IDR application to help remedy the problems.
Complaining can have some practical benefits for borrowers as well. After a complaint is submitted, the CFPB transmits the complaint to the servicer or collection agency and those companies have 15 days to respond and are expected to resolve complaints in 60 days. However, there is no guarantee that this will actually solve the issue. Borrowers looking for help resolving issues with their federal student loans can also now complain directly to ED with its new complaint system.
While we encourage everyone with a problem to complain to the CFPB or ED, there are many reasons why some of the most vulnerable and desperate borrowers may be the most likely to have problems, but the least likely to complain (such as limited internet access, lack of information their rights, or dealing with more urgent needs). This is why, in addition to taking complaints, it is vital that these regulators be proactive and not rely solely on complaints to identify and address problems.