The Consumer Financial Protection Bureau recently released a report regarding the recent failures of student loan servicers. The report consisted of allegations that numerous companies use extremely unprofessional practices when issuing and dealing with student loans. It reflects negatively on rising costs, the hardships when it comes to repayment, and the general problems borrowers face. These problems often lead many borrowers to a default soon after exiting the forbearance or deferment period.
The bureau will mainly pay attention to establishing a set of rules that all companies have to follow. These standardized regulations serve the purpose of entirely reshaping the industry of student loan servicers so people who use them can be free of instabilities and problems. They have a plan on how to stop bad servicers and how to provide student loan borrowers with quality support, no matter which company ends up being their servicer.
Since the state of student loan debt in this day and age is highly problematic statistically, it is crucial to make sure servicers do not provide additional hardships for borrowers. They are the people who manage accounts, process all payments, and provide customer support, so transparency and professional attitude is a must. When people who take out a loan experience financial hardships, they have to contact servicers in order to establish alternative repayment plans.
The Consumer Financial Protection Bureau made a public inquiry about student loan servicing practices in May, with a special interest in processes concerning paying back loans in a stressful or harmful way for borrowers. They were also interested in solutions that could improve services student loan borrowers use. More than thirty thousand comments were made by the public regarding federal and private financing options for college.
Millions of people who have student loan debts have extreme troubles repaying them, and many of them made comments to the Consumer Financial Protection Bureau criticizing the state of servicers who are crucial for meeting their needs. Servicers often lose paperwork, misapply payments, and perform various other unprofessional mistakes that negatively afflict borrowers. When those mistakes happen it is extremely difficult to correct them, and many loan borrowers have troubles accessing repayment options and alternatives which could help them avoid default.
All these issues and commentaries from the public made the Consumer Financial Protection Bureau very concerned. Problems are serious and widespread, and they devised several recommendations for reforming the system.
The report includes advice for policymakers and consumers on helping borrowers and decreasing the number of defaults. The principles they created offer a foundation on which a new reform will grow, and might provide borrowers with a way to communicate with service providers in a clear and transparent fashion in the future. Standardizing the system means that it will be possible for borrowers to inform themselves on the process of getting a loan, and applying the knowledge gained to any service provider in the country.
The Bureau aims to create a standardized set of rules all servicers would have to follow. This would give borrowers a sense of organization and a previously established system to operate in. There are a variety of student loan servicer practices at the moment, and they want to standardize them to provide a well-organized system for all. All servicers would be held accountable. Regulators should continue with borrower protection in case of errors or illegal activities. Customers should have access to customer service departments, who should in turn help them resolve any errors and answer any questions. Information will need to be clear and it should come in timely intervals. Information about things like repayment options and alternative payment plans should be available to all and constantly updated.
The Bureau is introducing a Repay Student Debt tool too, and it will provide student loan borrowers with valuable advice. It is a completely interactive resource, which will guide student loan borrowers through a step-by-step process on how to navigate through repayment options. It is particularly valuable when a borrower is facing default, as well-timed information can help greatly in a stressful situation. Information on requesting a lower monthly payment in a time of financial distress will also be available, and people who experience problems with the system will be able to submit a complaint to the Consumer Financial Protection Bureau.