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Consumer Financial Protection Bureau to Oversee Fed Loan Servicers

January 8, 2014 | Adam S. Minsky, Esq. Policy & Reform

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Let’s be honest. Federal loan servicing is fairly terrible. The Dept. of Education used to service Direct federal student loans in-house, but since 2009 it has contracted out these servicing operations to various private companies such as Sallie Mae, ACS, NelNet, FedLoan Servicing (PHEAA), and Great Lakes (among others). Sometimes, the Dept. of Education will transfer people’s federal student loan accounts to a different servicing company, seemingly randomly and with little advance notice. Many (if not all) of these companies do a fairly terrible job of working with borrowers.

The Consumer Financial Protection Bureau (CFPB), which is the recently-created federal agency designed to protect the rights of consumers, recently announced that it will be providing more direct oversight of these private companies that service federal student loans. The CFPB is aware of the ongoing and serious problems that borrowers encounter on a day-to-day basis, including improper payment applications, surprise account transfers, and failure to adequately advise borrowers of rights and options. Its oversight will include:

  • Gathering information and conducting investigations of loan servicing companies.
  • Ensuring compliance with federal consumers laws and federal student loan regulations.
  • Facilitating greater uniformity so that everyone is following the same rules.

I am cautiously hopeful that this is a positive development for student loan borrowers and will ultimately help reduce some of the most common problems I see in student loan servicing. Of course, time will tell.

Do you have a complaint about how your student loans are being serviced? Tell the CFPB.

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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

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Boston, MA 02110

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