A new report from the Consumer Financial Protection Bureau (CFPB) highlights the major complaints from borrowers about student loan servicers mishandling Public Service Loan Forgiveness.
The Public Service Loan Forgiveness program provides people in public service jobs with a path to debt forgiveness after 10 years — with the first borrowers eligible in October 2017. Borrowers report that servicers delay or deny access to loan forgiveness through wrong information about their loans, flawed payment processing, and substandard job certifications.
“We want those in public service jobs who give back to our communities to be able to stay on track, and not worry about unnecessary debt due to servicer errors,” CFPB Director Richard Cordray said.
The program, launched in 2007, is meant to encourage people to enter public service despite increasing levels of student loan debt. For these borrowers, this program can relieve the financial stress caused by large student debt and lower-wage public service work.
“We’ve promised our teachers, nurses, first responders, and other public servants that they have a path to a debt-free future if they make their payments on time while serving our communities for a decade,” CFPB Student Loan Ombudsman Seth Frotman said. “When the companies responsible for delivering on this promise aren’t up to the task, our dedicated public servants shouldn’t have to pay the price.”
One of the chief complaints was about incorrect or insufficient information from servicers about loan forgiveness eligibility. Borrowers said they are not receiving timely or accurate information about eligibility for these benefits, even after they identify themselves as public service workers. This missing information can trigger months or years of unnecessary loan payments and cost consumers thousands of dollars.
Another complaint was about processing delays and errors that cause borrowers to miss out on qualified payments. To stay enrolled in the program, borrowers must recertify their income and family size each year. When borrowers submit their recertification application on time, they can stay on their repayment plan and continue making payments until the servicer processes the application. But borrowers complain that servicers will instead put them in forbearance, which prevents them from making payments that qualify for loan forgiveness. Others report that when employers help in making student loan payments, servicers misapply these payments in a way that denies the borrower credit toward loan forgiveness.
Further, borrowers complained about job certification problems. Borrowers can submit a form prepared with their employer to get an update on how many qualified payments the borrower has made under the loan forgiveness program. Some borrowers reported wrongly receiving denials from servicers when trying to track their progress. Borrowers also say they don’t know how to correct a mistake because their servicer does not explain the denial. This can result in miscounts of qualified payments that can knock them off track toward loan forgiveness.
The CFPB updated its guidelines to prioritize its supervision of potentially illegal practices used by student loan servicers to administer loan forgiveness benefits. Bureau supervision examinations will look at whether servicers tell eligible consumers what they need to do to qualify for forgiveness, warn consumers who believe they are on track to qualify when they are not, provide clear information about the loan forgiveness program, and accurately evaluate borrowers’ eligibility and progress toward loan forgiveness.
The bureau is also launching “Certify Your Service,” an education campaign to empower student loan borrowers working in public service to protect their progress toward loan forgiveness. It includes information on the path to loan forgiveness.