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CFPB Spotlights Borrower Complaints about Student Loan Servicers Mishandling Public Service Loan Forgiveness Program
Friday, June 23, 2017 6:35 AM

Consumer Bureau Launches “Certify Your Service” Campaign to Help Teachers, First Responders, and Other Public Servants Stay on Track

The Consumer Financial Protection Bureau on Wednesday issued a report spotlighting complaints from borrowers about student loan servicers mishandling Public Service Loan Forgiveness. The Public Service Loan Forgiveness program provides people in public service jobs with a path to debt forgiveness after 10 years, with the first borrowers eligible in October 2017. Borrowers report that servicers delay or deny access to loan forgiveness through wrong information about their loans, flawed payment processing, and bungled job certifications.

The CFPB also issued updated guidelines to prioritize oversight of servicers’ administration of the Public Service Loan Forgiveness programAlso, the Bureau is launching the “Certify Your Service” campaign to help public servants stay on track for federal loan forgiveness.

View the report.

The Public Service Loan Forgiveness program, launched in 2007, is meant to encourage people to enter public service despite increasing levels of student loan debt. For these borrowers, this program can relieve the financial stress caused by unmanageable student debt and lower-wage public service work. To be eligible, borrowers must have a qualifying loan; be enrolled in a qualifying repayment plan, such as an income-driven repayment plan; and make 120 on-time payments while working for a qualified public service employer. Student loan servicers are responsible for administering these requirements.

The CFPB estimates that 25 percent of the U.S. workforce is employed in some form of public service, and many may be eligible for loan forgiveness under this program. These include teachers, social workers, first responders, servicemembers, nurses, and other public health professionals. So far, more than 500,000 people have signaled their intention to pursue debt relief under this program. According to the Department of Education, almost two-thirds of them earn less than $50,000 per year, and 86 percent earn less than $75,000 per year. In October 2017, the Department of Education will begin accepting applications from the first round of eligible borrowers seeking loan forgiveness under this program.

Wednesday’s report highlights complaints about servicing problems that may knock borrowers off track as they seek loan forgiveness earned through their public service and guaranteed by federal law. The report analyzes complaints from March 1, 2016 through Feb. 28, 2017. Some borrower complaints describe industry practices that delay or deny access to promised loan forgiveness, forcing some to forfeit months or years of qualifying service. This can add hundreds or thousands of dollars to the total cost of borrowers’ student debt. The report spotlights borrower complaints about:

  • Incorrect or insufficient information from servicers about loan forgiveness eligibility.
  • Processing delays and errors that cause borrowers to miss out on qualified payments.
  • Job certification problems that knock borrowers off track.

The CFPB has also updated its guidelines to prioritize its supervision of potentially illegal practices used by student loan servicers to administer loan forgiveness benefits. Bureau supervision examinations will look at whether servicers tell eligible consumers what they need to do to qualify for forgiveness, warn consumers who believe they are on track to qualify when they are not, provide clear information about the loan forgiveness program, and accurately evaluate borrowers eligibility and progress toward loan forgiveness.

Get the updated Bureau manual for student loan servicer supervision.

“Certify Your Service” Campaign
The Bureau is also announcing “Certify Your Service,” a consumer education campaign to empower student loan borrowers working in public service to protect their progress toward loan forgiveness. It includes guides developed specifically for first responders and teachers about what programs are available, which ones are best for each individual’s circumstance, and how to get on the path to loan forgiveness.

The Bureau is also updating its tools for employers to help their employees get started in the Public Service Loan Forgiveness program, and tips for helping employees stay on track. Public service employees aiming for Public Service Loan Forgiveness should:

  • Make sure they have the right type of loans: Only federal Direct Loans qualify for loan forgiveness under the Public Service Loan Forgiveness program. A borrower with another type of federal loan may be able to consolidate it into a Direct Consolidation Loan to become eligible for Public Service Loan Forgiveness.
  • Enroll in the right repayment plan: Income-driven repayment plans set the payment based on a borrower’s income, which may lower the monthly payment and maximize the amount forgiven. Some repayment plans, like extended repayment plans, don’t count toward Public Service Loan Forgiveness.
  • Certify that the work is in public service: Borrowers should submit an Employer Certification Form to track the progress of payments and to let the servicer know that they are working toward Public Service Loan Forgiveness. Employers can choose to provide this form to employees through their human relations office, or can find more information at consumerfinance.gov/pledge.
  • Stay on track: Borrowers should keep copies of the completed form for their records and follow up with their servicer after they submit the form. Borrowers should also submit updated forms each year and each time they change employers to keep track of qualifying payments.

Student loan borrowers experiencing problems related to repaying student loans, including the problems identified in today’s report, can also submit a complaint to the CFPB.

Get more information on CFPB consumer guides and tips for loan forgiveness.