Time is running out for student loan servicers to help servicemembers with student loans get debt relief
- Source: Consumerfinance.gov
Treliant Takeaway:
Treliant knows how to navigate the intersection between student loans and servicemembers benefits and protections under the Servicemember Civil Relief Act (SCRA). Our team of regulatory compliance professionals are ready to help you meet regulatory expectations regarding this hot-button topic.
Highlights:
On July 25, the Consumer Financial Protection Bureau (CFPB) shared a blog post regarding the Public Service Loan Forgiveness (PSLF) program and servicemembers with student loan debt. Under the PSLF program and the October 2021 expansion thereof, public service employees (including servicemembers) can receive benefits for which they previously did not qualify. The CFPB writes, “Servicemembers who already have Direct Loans will automatically be identified by the Department of Education to receive benefits. But servicemembers with Perkins or Federal Family Education Loans (FFEL) must consolidate those loans into Direct Consolidation Loans before submitting their PSLF applications.” The CFPB continues by putting the onus on the servicer to support servicemembers by giving them information and support, and stating that servicers “must use all the tools at their disposal [to] identify military borrowers and ensure they get the credit towards PSLF that they deserve.”
Continuing in the vain of putting the onus on student loan servicers, the CFPB points out that servicers are already required to perform proactive checks for borrowers that would qualify under SCRA. The CFPB endorses servicers using that information that servicers are supposed to already have, and using it to identify a population of Perkins or FFEL program borrowers that would benefit from a Direct Consolidation Loan in order to obtain a PSLF. They also make it clear that these proactive checks should be occurring, and it is expected that servicemembers are properly identified not just for PSLF purposes but for any other SCRA requirement, such as interest rate relief.
The CFPB then points out that outreach is “the right thing to do” because of the pressures of military life, the amounts of student loan debt held by the average servicemember, and the ripple effect of military borrowers failing to get a PSLF application approved, such as an inability to save money over time and even an impact to the ability to perform wartime responsibilities. The CFPB furthers their view on the topic, writing, “Failing to ensure servicemembers get full PSLF benefits would be particularly nonsensical because servicers already know which of their borrowers are in the military, and are already paid to assist them.”
It is abundantly clear that the CFPB expects servicers, not servicemembers, to step up to the plate on student loans and the PSLF program. Replete with references to existing requirements, the CFPB appears to be setting the expectation that servicers not only manage their existing requirements, but go a step further in identifying borrowers that would benefit from changing loan programs and performing proactive outreach.