Student loans are the only type of major consumer loan without annual licensing requirements for servicers and consistent state and federal regulations to govern their behavior — unlike servicers for mortgages, credit cards, and business loans that must follow strict rules to determine their interactions with consumers, set maximum rates and charges, and provide standard remedies for consumers in default.
This lack of oversight led the Consumer Financial Protection Bureau (CFPB) to find many student loan servicers:
- Inappropriately and inaccurately discourage borrower-friendly alternative payment plans that could save borrowers money
- Fail to respond to questions and payment processing errors
- Fail to provide sufficient information to borrowers regarding payments, interest rates, and eligibility for benefits such as loan forgiveness
The largest servicer in the country, Navient, is facing a joint lawsuit — from the CFPB, Washington, and Illinois — that charges it defrauded more than 1.5 million borrowers and added over $4 billion to the cost of student borrowers’ loans. Navient employees have routinely put borrowers into forbearance programs without their knowledge, significantly raising the cost of their loans by allowing interest to accrue and become added to the principal of the loan.
Coloradans have issued over 900 complaints against servicers, and total complaints are up 78% in 2017 compared to previous years; 9.5% of those complaints were from military service members.
Student loan debt has topped $1 trillion in recent years, making it the largest type of consumer debt outstanding other than mortgages. The average student loan borrower graduates with nearly $30,000 in debt. The CFPB estimates over 1 in 4 borrowers are delinquent or have defaulted on their student loan debt.
Our working group is focused on the following actions:
- 529 Account Reform Bill
- Student Loan Servicing: Colorado Attorney General oversight