How the CFPB Protect Student Loan Borrowers
Written by: Kristy Welsh
Last Updated: August 30, 2017
Taking on a student loan is one of the biggest financial decisions you will ever make. Don’t do it lightly and never before exhausting every other alternative. The CFPB can help, providing resources aimed at minimizing student loan debt, and ensuring your consumer rights are protected under every applicable law. Here’s how.
Financial Aid Shopping Sheet
The CFPB developed the Financial Aid Shopping Sheet as a tool to help students and their families easily compare the cost of college from one school to the next.
Though its use is voluntary, thousands of colleges and universities are already providing it to prospective students. So if you're shopping around for schools, be sure to ask them for it.
The Financial Aid Shopping Sheet provides a detailed breakdown of the school’s:
- Estimated cost of attendance
- Grants and scholarships
- Net cost
- Payment options
The Financial Aid Shopping Sheet also includes other school-specific information, like the percentage of full-time students who graduate within 6 years, percentage of students who default on their student loans, and median borrowing rate for federal loans.
Customizable Tool for Comparing Financial Aid Offers
Once you’ve compared Financial Aid Shopping Sheets, and narrowed it down to the top contenders, use the CFPB’s customizable online tool for comparing up to three schools in one report, including a side-by-side breakdown of the:
- Cost of attendance
- Financial aid offer
- Debt at graduation
- Monthly payments
- School’s graduation rate
- School’s loan default rate
- School’s median borrowing
Student Loan Options
Before applying for a student loan, make sure you know what you’re getting into. To that end, the CFPB addresses key differences among all of your student loan options, like:
- Differences between federal loans and private loans relative to repayment options, interest rates, eligibility, and loan limits.
- Differences between subsidized and unsubsidized student loans.
- Federal loan options (Perkins Loans, Direct Loans, and Parent of Grad PLUS loans).
- Private loan options (state agency loans, traditional bank loans, school loans).
- How often student loan rates change.
You can find answers to other student loan questions in the CFPB’s searchable online database.
Regulation of Student Loan Industry
To ensure that borrowers are protected, the CFPB oversees the student loan industry via studies, reports, investigations, legal actions, and new rules and regulations, as necessary.
This oversight includes, but is not limited to, the following.
Predatory Lending Practices
In February 2014, the CFPB took action against ITT Technical Institute for predatory lending practices, alleging that ITT set students up for failure with its zero-interest private “Temporary Credit” loans, with terms that were nearly impossible to meet.
Payment Processing Issues
In October 2013, the CFPB reported on its investigation into payment processing problems, including poor communication about payment application, snags when making small “good faith” payments, access to payment histories, lost payments, and more.
The report also included recommendations for how student loan servicers can do things better, like notifying borrowers when the servicing of their loan changes hands, not only before the transfer, but also afterwards; providing borrowers with timely payoff statements; and processing payments the same day they are made.
In February 2014, the CFPB released responses from student loan servicers about how they apply excess payments across multiple student loans. Since then, some servicers have revised their payment allocation procedures. For instance, in the event of an excess payment coming through with no allocation instructions, many more servicers are now automatically applying it to the borrower’s highest interest loan.
Service Member Rights
In August 2013, the CFPB investigated complaints from service members that some private student loan servicers were violating the law that says any existing private loans they have for school should be cut to no more than 6 percent upon request.
Affordability of Private Student Loans
In May 2013, the CFPB published a report on the affordability of private student loans based on more than 28,000 complaints from borrowers, including too high monthly payments, too high interest rates, no flexible payment options, no refinancing options, and lack of money to put toward housing or a car.
Co-Signer Release Advisory
In April 2014, the CFPB advised private student loan co-signers to request a student loan release, as lenders automatically default student loans – in good standing – simply because of a change in the co-signer’s situation.
Student Loan Complaints
Whether you’re having problems during the student loan application process or with the logistics of paying it back, the CFPB wants to hear about it.
When you submit a complaint to the CFPB:
- Your complaint and supporting documentation is forwarded to the company for their review.
- The company has 15 days to respond to the CFPB and to you.
- The CFPB provides you with email updates on your complaint status.
Note, the CFPB also shares complaints with state and federal law enforcement agencies, and sends a complaint report to Congress twice a year. Your complaint may also be posted to the Consumer Complaint Database (minus any personally-identifying information).