InfoBytes Blog
CFPB releases education ombudsman’s annual report
On October 20, the CFPB Education Loan Ombudsman published its annual report on consumer complaints submitted between September 1, 2021 and August 31, 2022. The report is based on approximately 8,410 complaints received by the Bureau regarding federal and private student loans—a 59 percent increase from the previous reporting period. Of these complaints, roughly 2,000 were related to debt collection, while approximately 900 mentioned Covid-19 (the categories increased by 122 and 23 percent, respectively). The report discussed certain risks raised in the consumer complaints, including difficulty pursuing claims and defenses against predatory institutions of higher learning, improper collection attempts on non-qualified private student loans that have been discharged in bankruptcy, and processing errors and servicer misrepresentations that have caused federal student loan borrowers to not be able to take full advantage of pandemic-related relief.
The report advised policymakers to consider several recommendations, including: (i) examining whether holders of private student loans originated to fund predatory for-profit schools are abiding by state and federal law; (ii) ensuring holders and servicers of private loans are not collecting on non-qualified discharged debt; and (iii) examining whether servicers may be creating barriers to pandemic-related relief. The Bureau also advised policymakers to consider whether to make loan forgiveness programs “opt out” rather than “opt in,” and whether simplifying consumer-facing incentives for consolidating commercial Federal Family Education Loan Program into Direct Consolidation Loans could benefit borrowers if made permanent.