The Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released its midyear update on student loan complaints, finding that borrowers “encounter obstacles when submitting applications for income-drive repayment (IDR) plans.”
Some of these obstacles included poor customer service, unexpected delays, lost paperwork and inconsistent or inaccurate application processing. Complaints described how this led to increased costs, reduced benefits and extend repayment terms.
The CFPB handled approximately 3,500 private student loan complaints from Oct. 1, 2015, through May 31, 2016. The CFPB also had handled 1,500 debt collection complaints related to private and federal student loans. From the beginning of March to the end of this reporting period, the CFPB handled 2,400 federal student loan complaints.
“This report focuses on problems for borrowers who submit an application to enroll in or recertify income and family size under an IDR plan. These observations build on previous reports by the bureau that noted consumers encountered problems with two other key segments of the IDR enrollment process,” the report states.
In the previous reports, the CFPB identified problems related to the information provided by student loan servicers regarding available repayment options, as well as problems related to communication and processes for recertifying income and family size for borrowers who do successfully enroll.
In the latest report, the CFPB focuses on servicing problems at every step of the IDR lifecycle, as identified by consumers with federal student loans.
“The bureau handled complaints from borrowers describing IDR application processing delays that last weeks or months, during which these borrowers lose out on protections that can lower their monthly payment, save them money on interest charges, and start them on the path to loan forgiveness,” the report states. “The bureau has also handled complaints from otherwise eligible borrowers describing differing approaches to addressing incomplete applications, depending on the identity of their servicer.”
For instance, borrowers reported that servicers rejected their applications without providing them the opportunity to fix mistakes or update documentation. Many borrowers were required to provide supplemental information directly to their student loan servicer outside of the electronic enrollment process, either to attest that they were unemployed or had no income, or to provide documentation indicating that their income had changed substantially since their prior year’s tax returns.
The CFPB and Department of Education (DOE) are calling on servicers to improve their processes for handling student loan borrowers’ applications for IDR plans. Last month, DOE issued a guidance bulletin saying that servicers must be more actively engaged with borrowers who do not have complete applications.
Along with its report, the CFPB published a prototype “Fix It Form” that servicers can use to improve their level of service.
“Servicers can use this Fix It Form to help borrowers understand whether their income-driven repayment application has been approved, denied or needs to be corrected,” the CFPB stated. “When a borrower needs to make a correction or provide more information, servicers can use the Fix It Form to help consumers understand how to ‘fix it’ and stay on track.”
Specifically, the “Fix It Form” aims to help servicers create more responsive, consistent servicing; improve the transparency around IDR application criteria; and improve access to applications by making the process easier to navigate.