Andrew Harrer / Bloomberg via Getty Images
Since the start of last year, the country’s most powerful consumer protection agency has sent examiners to companies that run student loan call centers to try and fix a loan cancellation program. in trouble. But the education ministry blocked the office from getting the information it needed, NPR has learned.
The Public Service Loan forgiveness program is designed to help firefighters, military personnel, nonprofit workers, and others. But thousands of people say they have been treated unfairly and rejected.
One of them was Wendy Feliciano, a police sergeant in the Bronx neighborhood of New York. In 2007, she heard about the program, which promises public service workers that if they make qualifying student loan payments for 10 years, their remaining student loan debt will be forgiven.
Courtesy of Wendy Feliciano
It sounded good for Feliciano. She owed about $ 40,000. So she called the number on her loan statement and said she was told “you are eligible for the program”.
Feliciano says she was told she didn’t need to do anything, just keep making her payments and that she would be ready. So she did that. But a decade later, she was told she didn’t qualify because she had been on the wrong type of repayment plan and therefore none of those payments counted.
“I was really angry and really frustrated,” says Feliciano. “I told everyone it was a complete scam.”
A lot of people feel that way. By the Ministry of Education’s own numbers, only 1% of people requesting loan forgiveness are approved. The remaining 99% – thousands of people like Feliciano – are rejected.
Now NPR has learned that the nation’s most powerful consumer watchdog, the Consumer Financial Protection Bureau, has launched an effort to fix the issues, but the Trump administration has stopped it from trying to help.
“It’s terrible,” says Christopher Peterson, a former prominent CFPB lawyer. “There are hundreds of thousands of people who rely on government to do what it takes for their livelihood and the well-being of their families.
In early 2018, with the increase in complaints, the office prepared to help these people.
Several sources familiar with the matter told NPR that the office has sent teams of reviewers to service companies that run call centers for student loans. These reviews generally last two months, with the team integrated into the company. There’s months of follow-up after that.
But the Trump administration’s education department told loan service companies not to share information with the office about the vast majority of student loan borrowers, citing privacy concerns.
This is even if companies are allowed to pass private financial information to credit reporting companies. But the Ministry of Education tell companies it was not acceptable to share information with a law enforcement agency. The CFPB is responsible for enforcing consumer protection laws.
“It seems absurd to me,” said Peterson, referring to the issue of confidentiality. “It’s the government of the United States.
Sources tell NPR the move undermined CFPB’s efforts to help. Reviewers couldn’t get most of the information the office wanted, so they couldn’t identify issues and help resolve them.
“It is 100% clear that the Public Service Student Loans forgiveness program is seriously flawed; it needs to be corrected, ”Peterson said. “And we have teams of seasoned and trained accountants and lawyers whose work and expertise fixes exactly that sort of thing. But instead of sending them out, we just leave them on the sidelines and the problem isn’t. resolved.”
Peterson says the office could go to court to force the issue and get the information it needs. But with a new director appointed by the Trump administration, he said, “the CFPB leadership has chosen not to choose this fight.”
The vast majority of student loans – worth nearly $ 1.5 trillion – are federal loans. But the Education Department tells NPR it’s not the CFPB’s job to monitor them. The ministry says the CFPB should stick to the much smaller world of private student loans.
In a statement to NPR, Education Department press secretary Angela Morabito said:
“The Department of Education is responsible for overseeing the federal student aid portfolio, the CFPB is responsible for overseeing the private student loan sector. The Department takes its responsibility to provide high quality service to federal student loan borrowers very seriously. FSA devotes significant resources to supplier monitoring and tracking efforts and has established performance-based contracts focused on improving customer satisfaction and outcomes related to reducing delinquencies and borrower defaults. . In order to protect the privacy of students, we ask that any request for information from providers be sent directly to the Department. We are currently working closely with the CFPB to protect student borrowers from third party debt relief fraud. ”
State prosecutors and outside experts like Peterson say the department is not properly monitoring all of these federal loans on its own.
Peterson, who was legal counsel to the former CFPB director, says the Education Department is wrong and the office has the power to monitor how loan service companies deal with people with these nearly 1 $ 500 billion in federal student loans.
“Congress has given the CFPB crystal clear authority to conduct law enforcement investigations and oversight audits of companies that collect student debt,” said Peterson. “The opposite position of the Trump administration is totally wrong about the law and a ridiculous betrayal of the 44 million student loan borrowers who rely on the government to protect their rights.”
When it comes to the student loan service companies themselves, “the challenge for a manager is that we’re stuck in the middle,” says Scott Buchanan, executive director of the Student Loan Servicing Alliance.
He says the loan service companies he represents have a tough job with millions of borrowers and a myriad of complex loan programs. “It’s really complicated,” he says. “And so I have no doubt that repairers do make mistakes every now and then, and when those are identified, we work to correct them.”
Buchanan says Congress could help by passing legislation to simplify various student loan programs. Congress passed provision to help borrowers like Wendy Feliciano who was on the wrong repayment plan for public service loan discount.
This fix Congress is called Temporary Extended Public Service Loan Forgiveness and it ran into Serious problems, too much. In Feliciano’s case, she is currently not eligible as she was also in the wrong type of loan to be eligible for several years. She settled this with her loan officer in 2011, but says she was still not placed in the right repayment plan even then.
As for what happens next, Buchanan says it would be better for everyone if the CFPB and the Department of Education could work together so that service companies don’t get mixed messages.
The CFPB declined an interview but said in a statement it would continue to “take action against those who break the law”. The education ministry tells NPR it is negotiating an information-sharing agreement with the CFPB. This would replace an earlier agreement that the department terminated.
Peterson says so far it’s not clear if this will do much to improve the situation. CFPB director Kathleen Kraninger is due to present her semi-annual report to Congress this week.