Student Debt Crisis says that the CFPB is doing such a poor job regulating loans that private organizations have had to step up instead.
A non-profit student loan group is suing the Consumer Financial Protection Bureau (CFPB), alleging that the federal regulator has abandoned its responsibility to oversee disbursal and collections servicers.
“We are suing the Department of Education and the CFPB because they are not doing their jobs,” said Natalia Abrams, the founder of Student Debt Crisis.
National Republic Radio reports that Abrams—whose group advocates policy reform and works directly with borrowers—believes the government is not longer acting as either a regulator or overseer. In recent years, says Abram, Student Debt Crisis has become overwhelmed by the sheer number of calls, e-mails and messages it receives, many from Americans struggling to deal with education debt.
Abrams and her organization have turned the problem around on the government: their lawsuit says that non-profit, private entities shouldn’t have to expend resources dealing with a public crisis.
“Over the past year, I have spoken with hundreds of borrowers, sometimes multiple borrowers, every single day and had to break their hearts,” Abrams told NPR.
According to Abrams and NPR, many borrower problems can be traced back to the Public Service Loan Forgiveness program, or PSLF.
Under the purview of PSLF, borrowers who work certain public sector, public interest jobs and keep atop their student loan payments for 10 years are eligible to have the remainder of their debt discharged. Firefighters, teachers and public defenders can all avail the program, which was created in 2007. Approved by the Bush administration, the PSLF was supposed to act as an incentive for graduates to enter public service positions, which often pay lower salaries than their private sector counterparts.
However, many people who should qualify for the Public Service Loan Forgiveness have been arbitrarily disqualified or had their discharge applications rejected. The Department of Education’s own statistics—recounted by NPR—show that 99% of PSLF applicants were turned down.
Jeremy, a Michigan police officer, told NPR that he pursued a law enforcement career precisely because he’d qualify for debt discharge.
“My decision to be a public servant, to join the military, was 100% based on that government promise,” Jeremy said.
Jeremy’s wife, too, works as a public school teacher. They’ve spent eight years paying down close to $120,000 in student loans.
But recently, Jeremy and his wife’s loan servicer broke bad news: that none of the payments they’ve made have counted toward the PSLF.
Instead of taking a stand against loan servicers, the CFPB and Department of Education have stood idly by. In many cases, they’ve tried to intervene in state-level lawsuits—often on the side of servicers trying to shut out consumer complaints.
“Rather than addressing the servicer misconduct detailed in those lawsuits, the Department of Education has tried to prevent these suits from going forward,” Abrams’ complaint says. Her suit further argues that the CFPB has “its own mandate” to police servicers—but under the Trump administration, it has “changed its policy,” abandoning its “obligation” to regulate.
And it’s not a simple situation. The Department of Education’s head, Betsy DeVos, is a fierce advocate of for-profit schools, many of which graduate students with out-sized debt. NPR recounts how, in 2018, the CFPB sent examiners to loan servicing companies. The examiners were supposed to figure out what was going wrong—but DeVos and the Department of Education directed servicers not to share any information with the CFPB.
Deepak Gupta, a former CFPB attorney, told NPR that the Education Department is wrong, too.
“This lawsuit is asking the court to order the CFPB to do its job,” Gupta said. But with the Trump administration in power, the Consumer Financial Protection Bureau struggled to function.
“The [CFPB] is completely abdicating its legal responsibility to oversee the vast majority of student loan debt,” Gupta said.