CFPB Report Details Student Borrower Harms from Servicing Failures and Program Disruptions
Analysis of 18,000 borrower complaints reveals payment processing errors, inaccurate bills and repayment information, and unhelpful customer service
The Consumer Financial Protection Bureau (CFPB) today released the annual report of the CFPB Student Loan Ombudsman, highlighting the severe difficulties reported by student borrowers due to persistent loan servicing failures and program disruptions. The report details how millions of student borrowers have received relief through new income-driven repayment plans, cancellation programs, and various adjustments and program automation processes. However, borrowers tell the CFPB how servicing breakdowns, including inaccurate information provided by servicers, improperly processed payments, and delayed income driven payment applications have stymied their return to repayment.
“Student borrowers continue to face lengthy delays and costly errors because of servicer failures,” said CFPB Director Rohit Chopra. “The CFPB is working to ensure there is greater accountability and improvements in the student loan system.”
“Our analysis of over 18,000 consumer complaints shows that servicer errors with billing, customer service failures, and incorrect repayment information are causing severe financial and personal distress to borrowers,” said CFPB Student Loan Ombudsman Julia Barnard. “As the federal loan system undergoes rapid changes, it is crucial that servicers immediately address these persistent issues. Policymakers should ensure that student borrowers can access the loan cancellation and lower monthly payments they are entitled to and implement new accountability measures to fix these long-standing problems.”
Today’s report focuses on the 2023-2024 Award Year (July 1, 2023 – June 30, 2024) and analyzes more than 18,000 student borrower complaints—the highest complaint volume the CFPB has received since it began collecting student borrower complaints in March 2012. Many of the servicer failures detailed in these complaints are persistent problems that have been well-documented by the CFPB, including errors with billing and auto pay, servicers providing incorrect information about accounts and repayment options, and months-long delays in the processing of income-driven repayment applications.
During the past year, 28 million federal student loan borrowers returned to repayment following the end of the COVID-19 payment pause. To assist struggling borrowers, the Department of Education implemented reforms resulting in billions of dollars in loan cancellation for almost 5 million borrowers and restored eligibility for 3 million formerly defaulted borrowers. However, servicing failures and legal challenges have hampered the implementation of critical loan relief efforts, including the Saving on a Valuable Education (SAVE) plan. Today’s report details challenges facing student borrowers, including:
Servicer failures are causing borrowers to pay inflated amounts that jeopardize their financial well-being: Borrowers described problems with billing, including inaccurate or late statements; errors with auto pay, including thousands of dollars incorrectly debited from accounts; and payments that were not properly applied to their balances. They also said servicers failed to give accurate guidance about income-driven repayment plans and imposed costly delays in processing refunds and applications for loan relief. For example, borrowers reported delays of nine months or more in receiving large refunds of up to $60,000. Among the dozens of individual consumer disputes highlighted in the report, there was an average of more than $14,000 disputed per borrower. These servicing issues are resulting in borrowers having difficulty meeting their other financial obligations like rent and car payments, being shut out of mortgages and homeownership, and forgoing saving for retirement, among other financial difficulties.
Legal challenges to the SAVE program are delaying loan relief: Because of ongoing litigation, enrollment in and implementation of SAVE is on hold. The eight million borrowers already enrolled in SAVE are no longer able to make payments, enroll in most other income-driven repayment plans, or gain credit towards cancellation while the litigation is ongoing. The hundreds of thousands of additional borrowers waiting to enroll in income-driven repayment plans are similarly left with few options.
Customer service “doom loops” and inaccurate communications are harming borrowers: Student borrowers reported encountering customer service problems such as website access issues. Borrowers reported being shuffled between servicers repeatedly without receiving help, waiting months for responses, and receiving inaccurate or misleading communications, such as miscalculated payment amounts and inaccurate due dates. Across the consumer complaint narratives highlighted in the report, borrowers waited an average of eight months for servicers to resolve their issues.
The report also urges several systemic reforms to improve student loan servicing, including holding borrowers harmless when they encounter servicing errors and ensuring that servicers are held accountable for performance failures. It also notes the importance of considering broader changes to the student loan system to reduce the persistence and prevalence of student loan debt.
The Dodd-Frank Wall Street Reform and Consumer Protection Act established a Student Loan Ombudsman within the CFPB and requires the Ombudsman to prepare an annual report. Since opening its doors in 2011, the CFPB has taken multiple enforcement actions for shoddy student loan servicing practices, including last month ordering Navient to pay $120 million and banning it from federal student loan servicing due to years of failures, including steering borrowers into costlier payment options instead of income-driven repayment plans. The CFPB also has multiple tools and resources available for students who currently have loans or are considering getting a loan.
Read the Annual Report of the CFPB Student Loan Ombudsman.
Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Employees who they believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov.