Senate Dems press CFPB on student loan forgiveness

Six senior Democrats are seeking information from the Consumer Financial Protection Bureau about oversight of student loan servicers involved in the federal Public Service Loan Forgiveness Program.

In a letter sent Wednesday to CFPB Director Kathy Kraninger, the senators questioned whether the bureau is prioritizing its supervision of potentially illegal practices by student loan servicers that administer the program that forgives the student loan debt of public servants. The letter was signed by Sens. Elizabeth Warren of Massachusetts, Sherrod Brown of Ohio, Dick Durbin of Illinois, Kirsten Gillibrand of New York, Sheldon Whitehouse of Rhode Island and Bob Menendez of New Jersey.

“We are concerned that CFPB leadership has abandoned its supervision and enforcement activities related to federal student loan servicers,” said the five-page letter. “This suggests a shocking disregard for the financial wellbeing of our nation's public servants, including teachers, first responders, and members of the military.”

Andrew Harrer/Bloomberg

Lawmakers cited recent enforcement actions and lawsuits brought by state attorneys general in Massachusetts and New York, and by private plaintiffs, alleging student loan companies deceived borrowers about their eligibility for the federal program.

Congress created the program in 2007 under the Bush administration to encourage students to enter teaching, nursing, policing and qualified nonprofit careers and have their loans forgiven after 120 monthly payments. But recent data from the Department of Education show that 99% of applications for the loan forgiveness program have been denied. Of the more than 41,000 borrowers who applied to have their loans discharged as of Sept. 30, only 206 had their debt forgiven, according to data published by the Department of Education.

Lawmakers asked Kraninger to clarify the role that the CFPB has played in overseeing student loan servicers since December 2017, when Mick Mulvaney, the former acting CFPB director, assumed control of the bureau.

The senators asked Kraninger to respond to a series of questions, including whether the CFPB has asked servicers to produce documents and whether servicers have declined to do so. The Education Department instructed student loan servicing contractors in December 2017 not to produce data or documents directly to other government agencies seeking information to support investigations or oversight, the letter said.

Lawmakers also questioned whether the CFPB is still investigating Xerox Education Services, which has serviced federally backed loans on behalf of big banks such as Wells Fargo and JPMorgan Chase. The investigation was first disclosed in 2015 in a securities filing.