Federal Guardian fines $ 1 million in student loan company for misleading borrowers over loan forgiveness

The Office of Consumer Financial Protection (CFPB), a federal oversight body that oversees the financial services industry, has issued a $ 1 million fine to a large student loan company for allegedly misleading borrowers about writing off a student loan. Here is an overview.

Student Loan Manager fined for allegedly misleading description of student loan forgiveness program

The CFPB has fined EdFinancial Services, one of the Ministry of Education’s main contractors. EdFinancial is taking on an increasingly prominent role in the federal student loan system as it takes over hundreds of thousands of borrower accounts from FedLoan Servicing, another contracted loan service company that is in the process of withdrawing from the federal student loan system.

The CFPB has accused EdFinancial of misleading borrowers about Public Service Loan Forgiveness (PSLF), a federal loan forgiveness program aimed at borrowers who have dedicated their careers to nonprofits or nonprofits. The Biden government recently extended PSLF eligibility through the “Limited PSLF Exemption” program, which will allow for temporary repayment periods that have been rejected (for example, due to payments made for the “wrong” type of federal loan or “wrong” repayment plan type) to qualify for a loan write-off.

According to the CFPB, EdFinancial misled borrowers about their eligibility for PSLFs – including the Limited PSLF Waiver program. “When FFELP borrowers asked about PSLF, Edfinancial, in many cases, told them that they were not eligible and the company did not tell them that they could become eligible by consolidating their loans into Direct Loans and meeting other eligible conditions. the conditions “, said the CFPB. in a statement Wednesday, summarizing its decision to impose sanctions on the company.

“Edfinancial’s failure to tell borrowers the full truth so that it can supplement its value underscores a systemic problem with loan servicing,” said CFPB Director Rohit Chopra. statement. “When student loan companies lie about cancellation and repayment schemes for borrowers, they are breaking the law.”

EdFinancial did not publish a public response to the CFPB action on its website or social media. However, the main borrower portal on its website includes a “Significant Update on Public Service Forgiveness Update” tab, which states: ) now, for a limited period of time, borrowers can receive credit for previous repayment periods that do not normally qualify for PSLF. ”The card directs borrowers to have access to the Ministry of Education Website in the program. It is not clear when EdFinancial’s website was updated to include this message.

CFPB crackdown follows earlier warnings about student lenders misleading borrowers

The CFPB had warned student loan officials last month not to mislead borrowers about writing off loans, otherwise they would risk sanctions.

“Through its oversight of student loan servicers, the CFPB has found that servers made misleading statements to borrowers about their ability to become eligible for PSLF,” the agency said in a statement in February. “When service providers fail to provide accurate and complete information, they mislead borrowers about their ability to take advantage of the PSLF, which could lead to tens of thousands of dollars in loan payments that should have been canceled.”

“Illegal conduct by a student loan officer can be devastating for borrowers who miss out on debt relief,” said CFPB director Rohit Chopra in a statement accompanying the bulletin. “We will work closely with the US Department of Education to ensure that public service loan cancellation promises are kept.”

The CFPB’s crackdown on EdFinancial follows an irrelevant settlement agreement between several attorney generals and Navient – another major student lending company – to deal with allegations of misconduct and fraudulent lending. This settlement agreement includes some student loan debt cancellation and repayment for thousands of borrowers. Navient has not admitted any wrongdoing as part of this settlement agreement.

Learn about recent changes in public service lending

Borrowers interested in the PSLF program, including the new Limited PSLF Waiver, should be cautious when learning about the requirements of the program to reduce the chances of being misled by their loan servers. And borrowers who think they have been misled or wrongly refused relief may have some options:

  • The Ministry of Education has established a detailed website on the program requirements for the Limited PSLF Waiver program.
  • Borrowers can also use the Department PSLF help tool to verify whether their employment can qualify for the program.
  • Borrowers who believe they have been misled by their loan server at PSLF or any other student loan program may file a complaint with the CFPB, which may trigger an investigation.
  • Debtors who have received an incorrect PSLF designation (such as a denial of forgiveness or an incorrect number of payments) can file a formal complaint and request a review at the Ministry of Education Feedback Department the Group of Ombudsmen. The Department has also stated that it will begin a review and appeal process of the PSLF next month.

Further reading of a student loan

Navient Student Loan Settlement: Who qualifies for relief and what to do

Extension of the student loan termination until 2023? Biden can do it.

Biden may extend student loan deferral and consider loan forgiveness, White House official says

Thousands qualify for extended student loan forgiveness scheme

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