Starting today, the Consumer Financial Protection Bureau will supervise nonbank student loans. This is new oversight for the large student loan market that serves over 40 million Americans.
The Bureau currently oversees loan servicing at the largest banks, but now they will also oversee nonbank servicers that handle more than one million borrower accounts to make sure they comply with consumer laws.
"Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules,” said CFPB Director Richard Cordray in a statement. “This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers.”
The CFPB estimates that student loan debt is approximately $1.2 trillion and that 7 million student loan borrowers are now in default.
Student loan servicers play a large role in student loans. They not only process payments, but they also manage borrowers’ accounts, process monthly payments, and work with borrowers during times of hardship. However, the borrower has no control or choice over which company services a loan.
The CFPB estimates it will supervise the seven largest student loan servicers with loans of more than 49 million accounts.
Some of the more common complaints that have been submitted to the CFPB pertaining to these loans: it is unclear how to pay off the loans early; borrowers with multiple loans complain of the distribution of partial payments that maximize the late fees and magnify the negative impact of a single late payment; and problems transferring loans between servicers.
The CFPB will supervise the cycle of private student loan debt from origination to credit reporting, and it will make all loan servicers work under the same rules.