On the heels of the Consumer Financial Protection Bureau (CFPB) taking action against a student loan servicer for alleged deceptive practices to borrowers about their potential eligibility for forgiveness and repayment options available to them, Federal Student Aid (FSA) Chief Operating Officer Richard Cordray put servicers on notice that FSA doesn’t believe this is an isolated incident.
“We have no reason at all to think that these issues — which dated from at least January 2017 through at least February 2021 — were unique to EdFinancial,” Cordray wrote in a letter to participants in the Federal Family Education Loan (FFEL) program following the settlement reached with EdFinancial Services this week.
Cordray wrote that FSA and CFPB will be working together to ensure the practices that created issues with borrowers receiving loan forgiveness, specifically through the Public Service Loan Forgiveness (PSLF) program, will not occur moving forward.
“FSA and CFPB can be expected to pursue further oversight of these issues, and every company should take pains to address them at once, so as to avoid penalties or other consequences,” Cordray added.
The letter comes after the PSLF program was temporarily expanded through a limited waiver, which runs through Oct. 31, 2022 — to ease the eligibility requirements and allow some borrowers to count previous payments toward forgiveness.
Cordray’s letter underscores problems that borrowers faced in pursuing PSLF forgiveness both before and after the temporary waiver was announced, and addresses concerns that some FFEL servicers are not providing adequate information and support to borrowers who may benefit from the waiver.
He notes that FSA has provided clear guidance about the PSLF waiver to borrowers, as well as the appropriate language servicers should be using when communicating with borrowers. Cordray added that all companies that interact with FFEL borrowers need to ensure that FSA’s guidance is being provided to their borrowers timely and accurately.
“The hallmark of a borrower-centered student loan system is ensuring that borrowers have all the information they need to best serve their financial interests,” Cordray said.
Publication Date: 4/1/2022