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CFPB Reports “Widespread Failures” In Student Loan Servicing. Nobody Is Surprised.

October 1, 2015 | Adam S. Minsky, Esq. Articles Current Events Policy & Reform

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The federal Consumer Financial Protection Bureau (CFPB) released a report this week harshly criticizing the entire student loan servicing system, with a particularly scathing review of federal student loan servicing. The report was based on over 30,000 comments submitted by student loan borrowers to the CFPB over the past year or so.

The report highlights some of the biggest failures of the system:

  • Servicing companies routinely provide misinformation, bad information, or conflicting information to student loan borrowers.
  • Servicing companies fail to properly counsel borrowers on their options.
  • When errors are made, either by the servicer or by the borrower, servicing companies make it extremely difficult to correct, often forcing borrowers to jump through unreasonable and unnecessary bureaucratic hurdles.

The CFPB report found that the conduct of student loan servicing companies actually contributes to borrower distress and can push people into delinquency or default, and harm their credit. Furthermore, widespread frustration with student loan servicing can cause borrowers to turn to third-party debt relief scammers for assistance, leading to even more problems.

Everyone who has student loans is likely reacting to this report with a collective “duh.” We’ve all dealt with the absurdly convoluted student loan system at one point or another, and we all have a horror story to tell, even me.

What the CFPB report does, however, is it summarizes these widespread practices in detail and frames them as identifiable problems, with associated recommended reforms. This could be the basis for “market-wide student loan servicing reforms to halt harmful practices and boost assistance for distressed borrowers,” according to Richard Cordray, CFPB director, in a recent interview with The Huffington Post. This could do a lot to stem the tide of borrowers who are slipping into default.

Let’s hope so. Because we all know this system is broken.

Check out the report for yourself.

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Articles Current Events Policy & Reform

About Adam S. Minsky, Esq.

Adam S. Minsky founded the first law office in Massachusetts devoted entirely to assisting student loan borrowers, and he is one of the only attorneys in the country practicing in this area of law. He provides counsel, legal assistance, and direct advocacy for borrowers on a variety of student loan-related matters. He regularly speaks to students, graduates, and advocates about the latest developments in higher education financing.

Books by Adam S. Minsky

The Student Loan Handbook for Law Students and Attorneys

The Student Loan Handbook for Law Students and Attorneys

Student Loan Debt 101

Student Loan Debt 101: The Definitive Guide to Understanding and Managing Your Student Loans

Student Loans for Parents and Cosigners

The Student Loan Guide for Parents and Cosigners

617-936-2788
asminsky@minsky-law.com
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Boston, MA 02110

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