Statement of CFPB Director Rohit Chopra on the Federal Student Loan Return to Repayment Issue Spotlight

In March 2020, the federal government announced that payments in connection with federal student loans owned by the U.S. Department of Education would be suspended, and interest would be waived for the duration of the suspension. In June 2023, Congress enacted legislation to end the pause, and a few months ago, required payments resumed.

Like many mortgages and auto loans, payments on student loans are collected by companies called loan servicers. These companies make money through financial arrangements and contracts with lenders. Importantly, borrowers don’t really choose their loan servicer; it is chosen for them. Because loan servicers tend to make more profit when they can spend less on customer service, consumer protection risks are heightened in these business models.

Today, the Consumer Financial Protection Bureau issued a report on the agency’s monitoring activities of federal student loan servicers since the restart of required payments. Many borrowers are making their first payment ever on their student loan, and many are also navigating their loan repayment options, including options that allow borrowers to make lower payments based on a percentage of their income. The report discusses challenges faced by borrowers with respect to contacting their servicer, enrolling in alternative repayment options, and billing statement errors.

The report shows that there is significant variation between servicers in their ability to manage these demands. During the payment pause, many servicers made a business decision to cut costs and significantly curtail their capacity. However, loan servicers must adhere to existing law. In certain cases, the CFPB has notified servicers that they may be in violation of federal consumer financial protection law.

While loan servicers may not be household names, their conduct has a significant impact on household finances. Outstanding student loan debt exceeds outstanding auto loan debt and credit card debt. If student loan borrowers are unable to successfully enroll in payment plans or obtain accurate information about their accounts, this can have a domino effect on the rest of their financial lives.

Given these high stakes, the CFPB will continue to carefully watch loan servicers and work with federal and state agencies to hold accountable those that violate laws protecting borrowers.

Read the report, Issue Spotlight: Federal Student Loan Return to Repayment.