- The Education Department recently reformed the Public Service Loan Forgiveness program.
- The CFPB is stepping up scrutiny over the information some student-loan companies provide on the reforms.
- The agency reported companies' misleading behavior that can block borrowers from debt relief.
President Joe Biden's top consumer watchdog says he's cracking down on student loan companies' bad behavior that's jeopardizing some borrowers' chances of forgiveness.
Last week, the Consumer Financial Protection Bureau (CFPB), led by Rohit Chopra, released a bulletin detailing how it will monitor student-loan companies' actions when it comes to debt forgiveness. Particularly, the agency is overseeing how companies are informing borrowers of recent reforms to the Public Service Loan Forgiveness (PSLF) program, which forgives student debt for public servants after ten years of qualifying payments.
Leading up to Biden's presidency, the program ran up a 98% denial rate, and the CFPB is stepping up its scrutiny over companies to ensure borrowers are no longer misinformed on the program.
"Illegal conduct by a student loan servicer can be ruinous for borrowers who miss out on the opportunity for debt cancellation," Chopra said in a statement. "We will be working closely with the U.S. Department of Education to ensure that loan cancellation promises for public service are honored."
The agency wrote that over past years, it has found that companies "made deceptive statements to borrowers about their ability to become eligible for PSLF," and the failure to provide accurate information has misled borrowers and resulted in tens of thousands of dollars of student debt that should have been canceled.
But things seem to be turning around for borrowers who have struggled to get relief from the program. As a result of announced reforms in October, the Education Department is temporarily allowing prior ineligible payments to qualify for PSLF through a waiver, and over 70,000 borrowers have so far seen their student debt wiped out as a result.
Federal Student Aid head Richard Cordray wrote on Twitter last week that the already delivered relief is "the tip of the iceberg." To ensure borrowers can continue reaping the benefits, the CFPB said it will be paying close attention as to whether student-loan companies are providing accurate information regarding the waiver and ensuring the waiver is being promoted to all borrowers who might be eligible.
"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," Education Secretary Miguel Cardona said in a statement.
The Pennsylvania Higher Education Assistance Agency (PHEAA) —the student-loan company that manages PSLF — announced in November it would extend its contract one additional year to allow time for impacted borrowers to smoothly transition to a new company. However, PHEAA is checkered with controversy and has come under fire by lawmakers like Massachusetts Sen. Elizabeth Warren, who said the company has an "atrocious record" of misleading borrowers into taking on more debt than they can pay off.
This isn't the first time the CFPB is cracking down on student-loan companies. In July, the agency found borrowers "regularly" got inaccurate information from the companies collecting their debt, including misrepresenting eligibility requirements for PSLF.