It’s been more than two years since the nation’s most powerful financial watchdog has examined the companies that manage about $1.5 trillion of federal student loans owed by 43 million borrowers.
On Thursday, two members of the Senate Banking Committee said they’re exasperated with the Consumer Financial Protection Bureau’s continuing failure to pursue mounting problems with the way student loans are handled.
“You and your staff have provided a variety of excuses and shifting explanations for the Bureau’s failure to fulfill this critical oversight role,” Democratic Sens. Sherrod Brown and Robert Menendez wrote in a letter, obtained by NPR, to CFPB Director Kathleen Kraninger. Brown is the committee’s top Democrat.
Last fall, sources told NPR that a turf war between the Department of Education and the CFPB was effectively blocking the bureau from sending examiners into loan servicing companies to look for problems — in particular with a troubled loan forgiveness program for public service workers. The program has been rejecting 99% of people who think they have met the requirements.
In a subsequent hearing, senators cited NPR’s reporting and told director Kraninger that her agency had broad powers to conduct such oversight and could go to court to force the issue. Under Education Secretary Betsy DeVos, the Education Department has told loan servicers not to cooperate with the CFPB where federal student loans are concerned.
“You don’t have to follow her lead,” Menendez, a Democrat from New Jersey, told Kraninger.
Kraninger responded at the hearing that she would rather not have an adversarial relationship with the Department of Education. “I have met with Secretary DeVos,” she said, “and we are already discussing how to move forward in an effective way to make sure that we’re overseeing servicers.”
But now several months since that hearing — and two years since the CFPB tried to send examiners into loan servicing companies to perform oversight and was rebuffed — there is no sign of any progress on resolving the turf war.
“We are deeply disturbed by your lack of transparency with Congress,” the senators wrote in their letter Thursday, which cited NPR’s reporting. “But we are even more disturbed by the way you have stood by — and continue to do so — as Secretary DeVos and the Department have obstructed the Bureau from examining federal student loan servicers.”
In a statement to NPR last year, Education Department press secretary Angela Morabito said that the CFPB’s job was to perform “oversight of the private student loan industry.” But the vast majority of student loans come from the federal government — roughly $1.5 trillion worth. “The Department of Education is charged with overseeing the federal [student loans],” Morabito said.
The senators in their letter urged Kraninger to seek a court order to compel the department to give the bureau access to information it needs to perform proper oversight. And the senators cited several areas of major concern that they say the CFPB should be looking into, including loan servicers “unfairly steering borrowers into forbearance or deferment plans — which are more costly for borrowers but more profitable for servicers — instead of income based repayment plans.”
Brown and Menendez also said that tens of thousands of teachers, nurses, servicemembers, and other public servants have been denied loan forgiveness. “Yet — even after multiple scathing reports by the Government Accountability Office and the Department of Education’s Inspector General — the Bureau is not examining the student loan servicer responsible for administering the Public Service Loan Forgiveness Program.”
The senators also raised concerns about practices that may be violating civil rights laws.
The Student Loan Servicing Alliance, which represents student loan servicers has told NPR in the past that servicers have an inherently difficult job working with millions of borrowers and navigating very complex loan programs. “It’s really complicated,” Scott Buchanan, the executive director of group told NPR last year. “And so I have no doubt that servicers from time to time do make some mistakes, and when those get identified that we work to fix them.”
The CFPB did not immediately respond to a request for comment.