The CFPB said it found student-loan companies had been engaging in deceptive and illegal behavior.
For example, it said companies had wrongfully denied borrowers targeted loan forgiveness.
They also failed to properly track borrowers' payments, pushing them off track for relief, it added.
Student-loan companies aren't abiding by the law, a top consumer watchdog says, and it's hurting borrowers.
Last week, the Consumer Financial Protection Bureau released a report analyzing the behavior of student-loan companies when it came to carrying out targeted loan-forgiveness programs, facilitating servicer transfers, and engaging with borrowers who hold institutional student debt, or debt owed to a specific school.
Specifically, the agency found that loan servicers "illegally hampered borrowers' access to federal student loan payment relief and cancellation programs including Income-Driven Repayment, Public Service Loan Forgiveness and Teacher Loan Forgiveness," a press release from the CFPB said. It added that those actions blocked borrowers from accessing the debt relief they qualified for.
"In many instances, examiners have identified servicers that have failed to provide access to payment relief programs to which students are entitled," the report said, adding: "In most cases the conduct constitutes the same unfair, deceptive, or abusive act or practice regardless of what entity holds the loan."
The report did not identify which loan companies were engaging in the referenced behavior.
In regard to Teacher Loan Forgiveness — a debt-relief program for full-time teachers — the CFPB said loan companies were improperly denying applications to the program, even when a teacher taught at a qualifying for school for five years but filled out the application formatting dates as MM-DD-YY, instead of MM-DD-YYYY.
"These wrongful denials resulted in substantial injury to consumers because they either lost their loan forgiveness or had their loan forgiveness delayed," the report said, adding that oftentimes, the borrowers who were denied may have refrained from submitting another application to get the debt relief.
Similar issues arose with Public Service Loan Forgiveness, it said, a program intended to forgive student debt for government and nonprofit workers after 10 years of qualifying payments. The report said payments toward forgiveness were inaccurately tracked and borrowers were wrongfully denied relief because the servicer claimed the applications were incomplete when that was not the case.
Additionally, the report said at least one servicer had "excessively delayed processing PSLF forms," which put borrowers significantly off track toward relief. The same thing happening to those enrolled in income-driven repayment plans, the CFPB added.
These findings come at a critical time for millions of student-loan borrowers. At the end of August, Biden announced up to $20,000 in debt cancellation for federal borrowers making under $125,000 a year. The application for that relief is set to go live in October, and loan companies will be tasked with implementing it. On top of application, borrowers in the PSLF program have less than one month to enroll in the expanded benefits the Education Department enacted last year, including a waiver expiring on October 31 that allows any past payments to count toward forgiveness progress.
As Insider previously reported, a number of student-loan companies have described a lack of information about fulfilling the recently announced relief, but the CFPB and the Biden administration have said they will oversee how the companies are implementing this relief and take action against any improper behavior.
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