The new student loan ombudsman at the Consumer Financial Protection Bureau (CFPB) published his first annual report Tuesday, highlighting a decrease in borrower complaints over the past two years, and confirming that the bureau has been continuing to work with the Department of Education (ED) to assist federal student loan borrowers despite the termination of a data-sharing partnership in 2017.
The annual report — which CFPB failed to produce in 2018 despite being required to do so by law — signals the first public action from the bureau's newest employee, Robert Cameron. Cameron, who was hired in August, filled a position that had been vacant since the former student loan ombudsman, Seth Frotman, resigned one year earlier due to issues with CFPB leadership and founded the Student Borrower Protection Center. Notably, lawmakers and higher education stakeholders expressed concern when Cameron was first named CFPB student loan ombudsman because he is a former employee of the Pennsylvania Higher Education Assistance Agency (PHEAA), which operates as a federal student loan servicer as American Education Services and FedLoan Servicing.
CFPB’s relationship with federal student loan borrowers was called into question in 2017, when ED terminated its data-sharing partnership with the bureau by striking two memoranda of understanding (MOUs). ED justified the decision by arguing it had the sole authority to oversee federal student loan complaints and that CFPB’s actions had "undermined" ED’s mission to protect borrowers.
“It is [ED’s] role to work with federal student borrowers to ensure that their issues are addressed within the rules applicable to this program,” ED wrote in the letter in which it announced it was ending the MOUs. “The CFPB’s intervention in this area adds confusion to borrowers and servicers who now hear conflicting guidance related to the Title IV student loan services for which [ED] is responsible.”
Cameron noted in the new report, however, that despite having no MOU in place, “during the past two years, the CFPB and [ED] continued to assist borrowers and to receive, review, and attempt to resolve borrower complaints,” and signaled that he planned to reestablish an MOU.
“Going forward, when an MOU is in place, deeper analysis of federal data is anticipated,” Cameron wrote.
Additionally, while outlining the responsibilities of his role in the report, Cameron wrote that the “requirements” of the ombudsman included establishing an MOU with ED “to ensure coordination in providing assistance and serving borrowers seeking to resolve complaints related to their private education loans or federal student loans.”
In the report, Cameron wrote that between Sept. 1, 2017 and Aug. 31, 2019, CFPB handled about 20,600 complaints regarding private (6,700) and federal (13,900) student loans — both of which have decreased during that time period. Between 2017 and 2018, the number of private student loan complaints decreased by 50%, and then by another 25% between 2018 and 2019. Complaints regarding federal student loans decreased by 44% between 2017 and 2018, and by another 8% between 2018 and 2019 — the reason for which is unclear.
“[I]t is not currently known with certainty why there was a decrease in complaints for the [2018-19] reporting period, particularly since the decrease in complaints is occurring while the number of borrowers and the total student loan amount is increasing year over year,” Cameron wrote. “... This presents an opportunity for more in-depth analysis regarding the decrease in complaints and the factors to which the decrease is attributable, including whether the decrease is attributable to practices, consumer outreach, or the actions of companies, organizations, or others.”
Between 2017 and 2019, Cameron wrote that the most common complaint across the board from borrowers related to “dealing with your lender or servicer,” followed by struggling to repay a loan. While a little more than half of private student loan borrowers chose working with their lender or servicer as their chief complaint, that figure rose to about 70% for federal student loan borrowers.
CFPB also noted in the report that it handled an additional 4,600 debt collection complaints related to both private and federal student loans between 2017 and 2019.
Publication Date: 10/17/2019