Senators Press CFPB To Dig Into Problems With Public Service Student Loan Program
Updated at 5:28 p.m. ET
Four U.S. senators told the head of the nation’s top consumer protection agency Thursday that they want her to launch examinations into serious problems with a program designed to offer loan forgiveness to public service workers.
An NPR story this week revealed that the Consumer Financial Protection Bureau attempted such examinations but was thwarted by the Trump administration’s Department of Education.
At issue is the Public Service Loan Forgiveness Program, which aims to help police, military service members, teachers, people who work at nonprofits and others. If they make qualifying payments for 10 years, the program promises to forgive the remainder of their student loan debt.
But the program is rejecting 99% of people who think they have done that when they apply to get their loans forgiven.
“According to a recent NPR report, in 2018 the CFPB launched an effort to find out why the program is failing our public servants, but Secretary [Betsy] DeVos’ Department of Education seems to have successfully stonewalled those efforts,” said Sen. Bob Menendez, during a hearing of the Senate Banking Committee.
The New Jersey Democrat went on to tell CFPB Director Kathleen Kraninger that she has the power to force the issue by seeking court orders that would allow her to do proper oversight despite what DeVos might want.
“You don’t have to follow her lead,” Menendez said.
Kraninger responded that she would rather not have an adversarial relationship with the Department of Education. “I have met with Secretary DeVos,” she said, “and we are already discussing how to move forward in an effective way to make sure that we’re overseeing servicers.”
Kraninger was referring to student loan servicing companies. Those firms run the call centers that many borrowers complain gave them bad information and advice when they called to ask how to take part in the loan forgiveness program. Early last year, the CFPB attempted to send examiners into these companies to dig into problems, according to sources familiar with the matter. But the effort was stymied after the Education Department told the firms not to share information about the vast majority of borrowers with the consumer protection bureau.
But as far as trying to work with the Department of Education, “it hasn’t worked so far,” Menendez shot back. He said department officials “haven’t cooperated with you at all — they’ve stonewalled you every step of the way.”
And he added that in the statement to NPR, the department said the CFPB doesn’t even have jurisdiction over nearly $1.5 trillion of federal student loans — the vast majority of student loans.
“So if you’re waiting for the Department of Education to give you permission to oversee the Public Service Loan Forgiveness Program, you’re going to be disappointed,” Menendez said. “So who’s going to get hurt here are public servants who deserve to have the opportunity to have loan forgiveness as part of their service. And I really urge you to do what your predecessor did and use the enforcement capabilities that you have.”
Other senators also pressed the issue. Jon Tester, a Democrat from Montana, said he hopes Kraninger pushes ahead with examinations of loan servicing companies to find out how they are working with and treating public service workers with student loans. The Education Department blocked the bureau from getting that information.
“The fact is if you don’t have that information you can’t do anything, right?” Tester asked Kraninger. “You have to have that information?”
Kraninger agreed, saying, “to engage in what are productive examinations, yes.”
Democrat Tina Smith spoke about a schoolteacher in her state of Minnesota.
“She, like so many others, [was] told by her [servicers] that she was on track and making qualifying payments for the PSLF even when that was not the case,” Smith said. “And that incorrect information was provided her and not addressed until years later. And of course she made all sorts of life decisions based on that bad information.”
Smith asked Kraninger if she thought supervision and examinations related to public service loan forgiveness were important.
“Yes, I do believe it’s important,” Kraninger said. “We do have a responsibility and ability to examine both entities engaged in federal student loans as well as private student loans.”
Congress has passed a fix to help some borrowers who did not realize they were in the wrong repayment plan to qualify for PSLF. But that program has run into problems too and is rejecting the vast majority of people applying for loan forgiveness.
Ranking member Sherrod Brown, D-Ohio, put the question to Kraninger this way: “Will you protect people trying to pay off their student loans or are you going to protect Secretary DeVos?”
Kraninger replied, “I will carry out my statutory responsibilities to protect consumers.”
In a statement to NPR, Department of Education press secretary Angela Morabito said the department “looks forward to working with the CFPB” under each agency’s “statutory authority and obligations, to serve student borrowers and to protect the taxpayers.”