In a new blog post by Student Loan Ombudsman Seth Frotman, the CFPB discusses its concerns regarding how student loan servicers may be responding to borrowers seeking to make partial prepayments on their student loans and provides advice to such borrowers.

The CFPB expresses its concern that “student loan servicers may be making it harder for borrowers to get ahead who have made additional payments on their loans. A number of consumers have reported that, after trying to get ahead on paying off their student loans, they were sidetracked by their student loan servicer.”  According to the CFPB, these consumers have reported that by lowering their monthly payment amount, their servicers extended the repayment period, thereby increasing the amount of interest the borrower would pay.  The CFPB indicates that servicers are reported to have made such a change without a request from the borrower and, in some cases, without letting the borrower know the change would be made.

The CFPB warns borrowers who seek to pay down their loans more quickly to watch out for “surprise redisclosure” of payment terms by servicers, meaning a resetting of loan repayment  terms.

Borrowers are advised that if they discover from their monthly statement or account payment history that their servicer has lowered their monthly payment, they can tell their servicer to set their monthly payment back to their requested payment amount, or choose to make extra payments each month.  Borrowers who regularly make partial prepayments through automatic payments are advised that they should contact their servicer to establish a standing instruction as to how such prepayments will be applied (such as to the loan with the highest interest rate).  Borrowers are also advised that they can provide instructions with individual payments and to make sure partial prepayments are not advancing payment due dates by creating a “payment holiday.”

Finally, borrowers are advised to submit a complaint if they have trouble with their servicers.

In February 2014, the CFPB presented its findings based on responses it received to a letter sent to private student loan servicers asking them for information about their practices for handling extra payments from borrowers.  Such practices are routinely the subject of scrutiny by CFPB examiners.