The CFPB Private Education Loan Ombudsman has issued an annual report containing an analysis of approximately 5,000 federal student loan complaints, 1,900 private student loan complaints, and 1,700 debt collection complaints related to private or federal student loans submitted by consumers between September 1, 2019 and August 31, 2020. The report notes that total student loan debt is now $1.677 trillion and is second only to home mortgages in outstanding household debt. This is the second annual report issued by Robert Cameron, who became the CFPB’s new Private Education Loan Ombudsman as of August 19, 2019.
During the period of this report, the Bureau has:
- signed a Memorandum of Understanding with the U.S. Department of Education regarding complaints, including the resolution of complaints and the sharing of information regarding complaints and borrower characteristics.
- conducted supervisory examination(s) and prioritized assessment(s) of federal servicer(s) (the number of examinations conducted by the Bureau is confidential).
- announced five enforcement actions against student loan debt relief companies and a student loan trust.
- created a new interactive guide within its Paying for College suite of tools and engaged in borrower education and outreach.
The report indicates that the Bureau handled approximately 24 percent fewer federal student loan complaints and 33 percent fewer private student loan complaints than the previous year (2019). These decreases have continued the downward trend since 2017. The Bureau notes that the decrease since March 2020 may be partially attributable to CARES Act relief, but that there are several other factors that have likely contributed to the overall decreases in recent years, including: “borrower education and outreach by federal and state agencies and regulators; borrower education and outreach by consumer advocates; and continued maturation of some industry participants’ compliance management systems, complaint monitoring systems, and their internal consumer advocate and ombudsman offices.”
Relief for student loan borrowers and degree attainment are the focus of the sections of the report containing the Ombudsman’s discussion and his recommendations:
- The Ombudsman makes several recommendations regarding CARES Act-related student loan relief and more general relief for student loan borrowers, including:
- Policymakers may wish to consider whether the duration of federally-mandated relief measures for student loans should be extended beyond December 31, 2020, for event-driven, time-driven, or a hybrid of both considerations.
- “Policymakers may wish to consider simplifying the myriad of existing loan forgiveness, cancellation, and discharge options as well as repayment options. Simplifying the options may reduce borrower confusion and barriers to accessing these programs.”
- “In particular, policymakers may wish to consider whether to revisit the undue hardship requirement in bankruptcy and how that requirement is applied to individual facts and circumstances. If the undue hardship requirement is revisited policymakers may wish to consider (1) ensuring that bankruptcy debtors receive a fresh start upon discharge and (2) ensuring that the harm ‘undue hardship’ was meant to prevent is addressed and prevented.”
- The Bureau notes that degree attainment reduces student loan delinquency rates and defaults and has a positive impact on achieving greater financial security. The Ombudsman recommends that policymakers may “wish to consider the alignment of appropriate metrics and incentives to encourage institutions of higher learning to decrease attainment gaps, and to share their students’ financial risk in a manner that continues post-graduation.”
- The report also notes that “there are socio-economic and racial gaps both in student loan debt and degree attainment” that “have been exacerbated during COVID-19.” The Ombudsman says that policymakers “may wish to consider creating and formalizing approaches to address these gaps in a manner that brings together stakeholders” and considers factors within, and outside of, the student loan market and higher education ecosystem in order to effectively address these gaps and implement enduring solutions with measurable results. Where there are current authorities to enable such solutions, those authorities should be appropriately used. Where there are not authorities that align with effective and measurable solutions, then appropriate recommendations should be made to policymakers that will enable such solutions.