New CFPB Report Details ‘Significant Problems’ With Loan Servicers Handling of PSLF

By Owen Daugherty, NASFAA Staff Reporter

Student loan servicers were found to have engaged in a pattern of providing inaccurate information to borrowers about their eligibility for the Public Service Loan Forgiveness (PSLF) program, according to a new report from the Consumer Financial Protection Bureau (CFPB).

The report detailed student loan servicers’ misleading and deceptive practices, which may have hindered and delayed borrowers’ entry to the program and their ability to qualify for loan forgiveness.

The findings from the report represent the latest evidence underscoring a flawed PSLF program and lead to larger questions regarding if the student loan servicers contracted by the Department of Education (ED) will remain in place under the Biden administration.

Education Secretary Miguel Cardona has already said it’s a top priority to fix the much-maligned program and ED recently announced plans to eventually rewrite the federal regulations governing the program.

The Student Borrower Protection Center, an advocacy group led by former CFPB Student Loan Ombudsman Seth Frotman, alleged the findings depict a widespread problem in the student loan servicing industry.

“The CFPB’s findings confirm that the student loan industry has been engaged in a widespread, illegal scheme to cheat public servants out of the loan forgiveness earned through their service to our country and in our communities,” Frotman said in a statement. “The Department allowed an entire generation of dedicated teachers, nurses, and other public service workers to be ripped off by student loan companies. Secretary Cardona must use his authority to right this tremendous wrong and deliver debt relief to these borrowers.”

Three key misrepresentations were identified in the report. Firstly, examiners identified a deceptive act or practice where servicers told Federal Family Education Loan Program (FFELP) borrowers that they could submit their employer certification forms (ECF) to receive a determination on whether their employers are eligible employers for PSLF, even though FFELP borrowers who submit an ECF prior to consolidating into a Direct Loan (DL) will be rejected, without any determination about their employer’s PSLF eligibility.

“The servicers’ representations are likely to mislead borrowers into believing that they should submit an ECF prior to consolidation to receive confirmation that their employers are eligible,” according to the report. “Consumers’ interpretation was reasonable under the circumstances and they were likely to be misled by the servicers’ representations, given the specificity of agents’ statements and the fact that agents routinely provided information about the PSLF program.”

Secondly, the report found servicers engaged in a deceptive practice by advising borrowers with FFELP loans that the loans could not become eligible for PSLF. The loans can in fact become PSLF eligible, they just need to be consolidated into a DL first.

“Examiners found that during calls servicers represented to consumers with FFELP loans that they had no potential course of action to become eligible for PSLF,” the report stated.

Finally, servicers were found to have deceived borrowers by telling them that only employers who are classified as nonprofits are eligible under the PSLF program. This is not the case, as qualifying employers include local, state, federal or tribal government entities, in addition to nonprofit entities. 

“Servicers stated in calls that consumers could be eligible for PSLF if they worked for nonprofits but did not mention that government employees and other types of employees are also eligible,” the report noted. “This statement created the net impression that only employees of nonprofits were eligible.”

Though individual loan servicers were not identified in the report, the findings paint a worrying picture considering the importance loan servicers play in assisting borrowers through the repayment process. 

"While I don’t know whether the identified concerns were with a group of accounts or just a couple out of the millions of federal loans serviced every day, what we all know is that the barriers that Congress intentionally put into place have made it harder for every borrower to access PSFL and the confusing requirements that vary by law for a borrower’s situation or loan type are challenging and overly complicated to administer," Scott Buchanan, executive director of the Student Loan Servicing Alliance, told NASFAA in a statement. "Servicers have long publicly supported simplifying the program - and for the CFPB and ED to agree on and proactively provide some unified and consistent guidance."

The report comes on the heels of data recently released by ED showing over a six-month time period about 98% of applications for forgiveness through PSLF were denied.

PSLF has long been scrutinized, with a 2019 report detailing that only 1.1% of applicants had their request for forgiveness approved. A recent report found that over the course of a decade, ED failed to provide any regulation, guidance, or direction to student loan companies that advise public service workers about their right to PSLF.


Publication Date: 7/1/2021

Shawn B | 7/1/2021 2:23:37 PM

PS - I owe now more than I ever borrowed and have been paying on my loans since 1995.

Shawn B | 7/1/2021 2:22:20 PM

In my case, I was told my FFELP loans were consolated in 2007 to participate in PSLFP and my payment pay was changed to a PSLFP payment plan. My servicer said no action on my part needed to be taken until I reached my 10 years. In 2016, I decided to check on my loans and found out that although I was on the correct payment plan for PSLFP, I was not in the program and my loans didn't qualify (FFELP). After asking for help and contacting everyone I could, I decided that those years were gone and I would never be able to recover them so I did consolidate my loans to qualifying loans and officially got into the PSLFP. After nearly 14 years of public service, I have 1 year in the program. Thanks loan servicers and DOE, not!

David S | 7/1/2021 9:2:43 AM

Just as FFELP lenders raked in billions of taxpayer dollars that could have gone to helping students, this is another example of what happens when private for-profit industries become a key part of a publicly funded assistance program. Expand the Dept of Ed so that it can service its own loans and manage PSLF itself.

Also, Congress should change PSLF so that it's incremental...get partial forgiveness in less than 10 years, maybe even a little bit for each year of qualified employment during repayment. But partial forgiveness after 5 years at the absolute minimum. Repaying for 10 years with the expectation of forgiveness and then being denied makes borrowers feel absolutely helpless, and that's exactly what our profession should be fighting against.

Paula G | 7/1/2021 8:20:07 AM

In our case, we were told that the job we held in a university was not valid as it was not face to face/direct contact with students. After 21 years and 10 years of serious illnesses/deferred payments we have paid back more than we borrowed, but still owe double what we borrowed due to interest.
So many people probably never even submitted applications due to incorrect information to start with. Once we found out we were lied to, we had already consolidated to a loan that is not part of the pslf program.

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