Home Philatelic investment Loan officers mislead borrowers seeking debt relief

Loan officers mislead borrowers seeking debt relief

  • The Consumer Financial Protection Bureau has found that student loan service providers routinely mislead borrowers.
  • Deceptive practices include misrepresenting eligibility for the public service loan forgiveness program.
  • Biden campaigned to fix the program, but he still rejects 98% of borrowers.
  • See more stories on the Insider business page.

President Joe Biden’s education department has started the process of reforming the student loan system. But new findings from an agency within his administration underscored the urgent need to implement reforms.

The Consumer Financial Protection Bureau (CFPB), which ensures that consumers are treated fairly, issued a report On Tuesday, it was discovered that the loan services had misled borrowers under the Federal Family Education Loan Program (FFELP) who had attempted to enroll in the civil service loan forgiveness program. (PSLF).

The FFELP ended in 2010, but according to data from the Ministry of Education, 11.2 million borrowers under this program still have outstanding loans totaling over $ 248 billion.

In addition, the PSLF allows utility workers to receive a loan forgiveness after 120 qualifying monthly payments, but the program has persistent flaws and the CFPB found that “agents routinely provided inaccurate information on eligibility. to PSLF or direct consolidation loans, resulting in deceptive acts or practices “. which prevented borrowers from benefiting from debt relief.

According to the agency, deceptive practices include major borrowers submitting employer certification documents before consolidating their loans, even though PSLF guidelines say they reject exactly such submissions. They also informed FFELP borrowers that their loans were not eligible for PSLF, but that these borrowers would be eligible if they consolidated their loans.

Other deceptive practices that the CFPB found included:

  • Distort the employer’s eligibility requirements for the program;
  • Do not reverse the consequences of automatic registration for forbearance from natural disasters;
  • And the implementation of inaccurate monthly payments for borrowers after they transfer to new providers.

Student Borrower Protection Center executive director Seth Frotman said in a declaration that the CFPB’s findings “confirm that the student loan industry has embarked on a widespread and illegal scheme aimed at depriving civil servants of the forgiveness of loans obtained through their service to our country and our communities.”

Biden has campaigned to reform the PSLF, but Insider reported that Department of Education data shows 98% of borrowers have still been rejected from the program since taking office.

Regarding borrowers under FFELP, Education Secretary Miguel Cardona announced in March that he was extending the hiatus on federal student loan interest and collections on all overdue loans to FFELP borrowers whose loans were held by private lenders, affecting approximately 1.14 million borrowers.

But the agency’s findings underscored the need to provide additional relief to borrowers and fix the flawed student loan system.

The Center for the Protection of Student Borrowers wrote on Twitter: “Today’s action by @CFPB leaves no doubt: @SecCardona must use the vast powers it already has to offer teachers, nurses and other public service workers across the country the forgiveness they have been promised. “