On Monday, a group of twenty-three senators sent a letter to the Consumer Financial Protection Bureau's (CFPB) Director Kathleen Kraninger demanding that the agency investigates Pennsylvania Higher Education Assistance Agency, better known as FedLoan and PHEAA, a student loan servicer. Specifically, the senators demand that the CFPB look into PHEAA's alleged mismanagement of the Public Student Loan Forgiveness (PSLF) program.
The letter cites two reports which found that PHEAA failed to properly administer the PSLF program due to its inability to properly manage payments. One report was issued by the CFPB's own Student Loan Ombudsman in 2017, which found that PHEAA's "flawed payment processing, botched paperwork and inaccurate information" led to the denial of loan forgiveness to qualified public service workers. The second report was a 2018 Government Accountability Office report, which similarly found that PHEAA failed to properly account qualifying payments and, as a result, denied loan forgiveness to qualified borrowers.
The letter cites shocking statistics about the low approval rate of loan forgiveness applications. The letter states:
According to a GAO report released last month, only 661 out of 53,523 applications were approved for loan forgiveness under the expanded PSLF program. In total, only 1,216 out of 102,051 PSLF applications have been approved for loan forgiveness.
With some quick math, that equals roughly a 1.2% approval rate of applications.
The senators call on the CFPB to take action and rebuke the CFPB for not doing something earlier. According to the letter, "the time has passed for the CFPB to examine PHEAA's servicing practices for potential violations of law," so now it asks that the CFPB prevent future harm. The senators "ask the CFPB to do its job and immediately open an enforcement investigation into PHEAA's service practices, management of the PSLF program, and other potential violations of federal consumer financial laws."
The senators who joined the letter can be found listed at the bottom of the letter.
This is a sticky situation. Senators call on the CFPB to investigate student loan services, but the CFPB argues that the Department of Education (ED) is blocking its efforts from doing so. ED itself took the position in February 2018 that only it has the power to regulate student loan servicers and terminated the Memorandum of Understanding with the Bureau. The senators' letter requests a response by November 11, so we will keep our eyes peeled for what happens next.