A new CFPB report entitled “Overseas & Underserved: Student Loan Servicing and the Cost to Our Men and Women in Uniform” contains the CFPB’s findings regarding student loan servicing problems faced by servicemembers.  According to the CFPB, it has handled more than 1,300 complaints from military borrowers relating to the servicing or collection of student loans since it published its last report on this topic in October 2012.  While the new report relies primarily on complaints, the CFPB states that it also reviewed other information, such as comments received in response to requests for information, submissions to the “Tell Your Story” feature on its website, and input from discussions with consumers, regulators and law enforcement agencies, and market participants.

The report, which deals with both federal and private student loans, includes the following findings:

  • Obstacles encountered by servicemembers seeking military deferments include insufficiently trained servicing representatives, failure by servicers to provide necessary information, properly process deferments or explain denials, and inconsistencies in application criteria and policies and procedures for deferments when borrowers have multiple types of student loans or loans serviced by multiple servicers.
  • Servicemembers or their family members seeking a student loan discharge have encountered a lack of transparency as to the process for requesting forgiveness of loans made to a servicemember killed in action.  Servicers have not accurately reflected discharges in credit information furnished to consumer reporting agencies and may not have policies and procedures in place to provide recourse for permanently disabled veteran co-signers of private student loans.
  • Servicemembers continue to encounter difficulties in obtaining the SCRA six percent interest rate cap, with servicers improperly processing such requests or failing to clearly convey information about the application process and other requirements for obtaining the SCRA rate cap.
  • Problems encountered by servicemembers in attempting to use cash benefits awarded under the Department of Defense Student Loan Repayment Program (SLRP), which are paid directly to servicers, include processing problems when directing funds to specific
    high-rate loans and poor communications relating to the processing of SLRP payments, such as the servicemember’s obligation to make additional payments while an SLRP payment is being processed.

In May 2015, the CFPB issued a new request for information regarding student loan servicing.  It has actively been soliciting responses to the RFI, which are due by July 13, 2015, by encouraging borrowers to “sound off” about their “problems with student loan debt” and run ins with “repayment roadblocks.”  (Another CFPB blog post published yesterday tells borrowers that “it’s not too late to share your #studentdebtstress story.”)

In its conclusion to the new report, the CFPB comments that “[i]n contrast to the robust federal protections for borrowers with mortgages, there is currently no comprehensive statutory or regulatory framework that provides uniform standards for the servicing of all student loans.”  This comment strongly suggests that in addition to supervising nonbank larger participant servicers of federal and private student loans, the CFPB is considering rulemaking to establish servicing standards for student loans.