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Report Shows Student Loan Servicing Is A Mess In Need of Urgent Cleanup

Tuesday, September 29, 2015

Today, the Consumer Financial Protection Bureau's (CFPB) and Department of Education (DOE) issued a new report on student loan servicing that confirms concerns that the student loan servicing system is both hurting borrowers and taxpayers and in need of swift regulatory reform.

Maura Dundon is Senior Policy Counsel at the Center for Responsible Lending and an expert on student lending issues. She issued the following statement:

This report confirms that student loan servicing is a mess in need of an urgent cleanup. The CFPB should use all available tools, including rulemaking, to address these issues, and the Department of Education should engage in stronger oversight. Unlike mortgage and credit card servicing, student loan borrowers have few rights regarding how their loans are managed. Bad student loan servicing may be making the student loan default problem worse because borrowers don’t get the information they need to avoid defaulting.

It is especially harmful that shoddy student loan servicers are failing to enroll borrowers in income-based repayment plans when they get into trouble paying their loans. Borrowers have a right to enroll in these plans so they do not default. Preventing default benefits both borrowers and taxpayers. Since college costs are skyrocketing and student loans can never be discharged in bankruptcy, income-based repayment is a crucial protection for borrowers.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Andrew High at Andrew.High@responsiblelending.org or 919-313-8533.