There’s a shakeup happening in student loans. After years of confusion over how to make payments early or how to make sure payments are applied in a way that’s beneficial to the borrower, the Consumer Financial Protection Bureau is stepping in. And with student loan debt in the U.S. hovering just over $1 trillion, the impact won’t be small. Read on to find out what this means to you.
Student loan debt is becoming a way of life for many young professionals but somehow that hasn’t led to a better understanding of how to pay the debt off faster. What’s worse, many people don’t even know who they owe these payments to or how to apply the payments. And it’s not all the borrowers’ fault.
While in school, students sometimes experience difficulty when they try to prepay their loans. The payments in some cases don’t go through (or get delayed), which is very inconvenient and frustrating for the borrower. Post-graduation, many borrowers find that their loans suddenly get “purchased” by another loan servicer, meaning the graduate has to set up new payments to a new company. This can be difficult, especially when the student may not find out until after they try to make a payment as usual only to find that it’s rejected. In some cases, borrowers have found out about the new loan servicer only when they receive a past-due notice from a company they’ve never heard of!
Finally, many who try to pay extra on their loans find that the extra doesn’t get applied to the principal balance. Rather, the extra amount just pays the account forward, resulting in more interest charges for the borrower.
What does all of this mean? That even those who are trying to stay current or get ahead of their debt are being held back by confusing and even deceptive practices by the servicers.
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The CFPB Taking Action
Thankfully, borrowers have logged their complaints and now the CFPB is taking action. Starting March 1, the CFPB is taking authority over student debt serviced by non-bank servicers (having already had authority over bank servicers). This opens the door for the CFPB to monitor the practices of seven of the largest loan servicers, including both private and federal student debt.
According to an article in the New York Times, this oversight will affect,
“more than 49 million borrower accounts and represent most of the activity in the student loan servicing market”.
Given those numbers, there’s a good chance that this could include you. So what will this oversight do for you? The CFPB is going to hold student loan servicers to the standards of federal consumer protection laws and take action if the servicers aren’t in compliance. They’ll also keep an eye out for unfair or deceptive practices toward student loan borrowers. In short, the CFPB is working to make sure your money is going where it should be.
Doing Your Due Diligence
The CFPB can’t do their job alone. While they are working to analyze the practices of student loan servicers to ensure that they are fair and reasonable, you can still create more impact by letting the CFPB know if your loan payments are applied unfairly or if you encounter any other deceptive practices by your student loan servicer. All you have to do is submit a complaint on the CFPB website and monitor the status at your convenience. Past complaints are what have led the CFPB to take action now, so you can further contribute to forward momentum by logging complaints of your own. Working with the CFPB, you can take action so that unfair practices by servicers won’t stand between you and freedom from student debt.
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