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CFPB Finalizes Policy Guidance for Student Loan Servicers

The guidance outlines actions student loan servicers should take to ensure borrowers have access to the Public Service Loan Forgiveness waiver before it expires in October.

03/03/2022 10:45 A.M.

3 minute read

The Consumer Financial Protection Bureau’s compliance bulletin and policy guidance detailing student loan servicers’ obligation to halt unlawful conduct regarding borrowers’ eligibility and benefits under the Public Service Loan Forgiveness (PSLF) waiver is now in effect.

It was published in the Federal Register March 1.

The bulletin recommends actions servicers should consider taking to ensure they do not misrepresent borrower eligibility or make deceptive statements to borrowers about the PSLF program and the waiver, according to a news release from the CFPB.

“We will be working closely with the U.S. Department of Education to ensure that loan cancellation promises for public service are honored,” said CFPB Director Rohit Chopra in the news release.

In 2007, Congress enacted legislation to provide loan cancellation for borrowers working in an eligible public service job. For public service employees with Direct Loans, PSLF cancels the remaining balance on those loans after they make 120 loan payments while working for a qualifying employer.

“We want to make sure that every single borrower who could benefit from the PSLF waiver has the chance to do so, and giving borrowers accurate and timely information about their eligibility is critical,” said U.S. Secretary of Education Miguel Cardona. “I appreciate the CFPB’s partnership in holding servicers accountable for their role in helping borrowers access loan forgiveness under PSLF.”

In October 2021, the Department of Education announced the PSLF waiver, which extended benefits to borrowers who had previously been shut out of the program—including due to not getting the information they needed about how they could become eligible for PSLF, according to the CFPB.

Under the waiver, any past payment on a federal student loan by a borrower working in public service can count toward PSLF, regardless of payment plan, loan type or whether the payment was made in full or on-time. This includes payments made through the Federal Family Education Loan (FFEL) and Federal Perkins Loan Programs, which did not previously count under the old PSLF rules. In order to benefit under the waiver, many borrowers will need the assistance of their student loan servicer to take action by consolidating their loans, filing a PSLF application, or both, before the waiver ends on Oct. 31, 2022.

As servicers administer the new PSLF waiver, the CFPB expects them to comply with federal consumer financial protection laws. The CFPB plans to prioritize student loan servicing oversight work in deploying its enforcement and supervision resources in the coming year with a specific focus on monitoring engagement with borrowers about PSLF and the PSLF waiver, according to the news release.

The CFPB says it will pay particular attention to whether:

  • Servicers of any federal loan type provide complete and accurate information about the PSLF waiver when discussing PSLF or loan consolidation in any communications.
  • Servicers have adequate policies and procedures to recognize when borrowers are expressing interest in PSLF or the PSLF waiver, or where their files otherwise demonstrate their eligibility, and to direct those borrowers to appropriate resources.
  • Servicers take steps to promote the benefits of the PSLF waiver to borrowers who express interest or whose files otherwise demonstrate their eligibility.

The CFPB also recommends, to prevent unfair, deceptive, or abusive acts or practices, that student loan servicers consider enhancing their compliance management systems to develop and implement policies and procedures to ensure that all borrowers receive accurate and complete information about the PSLF waiver and representatives facilitate their enrollment.

Read the complete compliance bulletin and policy guidance here.

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