On November 15, the CFPB published its 2024 Annual Report of the CFPB Student Loan Ombudsman, highlighting the challenges and changes in the student loan system during 2023-2024. Among other things, the report described challenges faced by the student loan system stemming from the return to repayment of 28 million federal student loan borrowers after a payment pause, as well as the DOE’s efforts to correct servicing errors including payment processing issues, incorrect repayment information, and customer service failures. The report also identified additional issues such as borrowers experiencing unauthorized withdrawals, overpayments and delays in loan cancellation processing.
The report also discussed federal student loan programs, including systemic reform efforts like the implementation of the “SAVE Plan” and income-driven repayment account adjustments. The report emphasized the need for consumer protections when borrowers encounter servicing errors and program disruptions, and it described the DOE’s efforts to remediate a “long history of servicing failures.”
The CFPB’s report also described issues in the private student loan market, stating that private loans can be riskier and more expensive than federal loans. Among other things, the CFPB reported that private borrowers reported significant financial hardship, unaffordable payments, and difficulties in obtaining loan cancellation based on school misconduct. The report criticized the practice of “transcript withholding” specifically by colleges and universities as a debt collection tactic.
Based on its review, the CFPB made three recommendations: First, borrowers should be held harmless when they encounter servicing errors; second, servicers should be held accountable for performance failures; and third, policymakers should consider a broad program overhaul to reduce the prevalence of student loan debt.
