$3 million in compensation on table for student loan borrowers

The Consumer Financial Protection Bureau earlier this week took action against National Collegiate Student Loan Trusts and Pennsylvania Higher Education Assistance Agency (PHEAA). The federal watchdog claims that the two failed to properly service student loans over several years for thousands of borrowers.

The proposed stipulated final judgement filed with the court would require the two entities to pay a combined total of $2.15 million in penalties that will be deposited in the CFPB victim’s relief fund. Additionally, they will have to pay almost $3 million in redress to borrowers, most of whom never received the payment relief they had sought from their loan servicer PHEAA nor those sent to National Collegiate Student Loan Trusts. Furthermore, they will have to correct outstanding requests that borrowers made as provide financial redress as yet to be calculated.

$3 million in compensation on table for student loan borrowers

The CFPB alleges that from 2015 until 2021, the defendants failed to properly respond to borrowers’ requests, including during the covid-19 national emergency. “These included requests for co-signer release, extension of forbearance or deferment, loan settlement or forgiveness, Servicemember Civil Relief Act benefits, or other forms of payment or interest rate reduction,” the agency said in a statement.

As part of the $3 million enforcement action laid out, borrowers who “did not receive timely responses to exception requests” may get $200 payments. Additionally, the CFPB is asking for the defendants to reimburse or return payments made by borrowers or co-signers as well that they reimburse or waive fees. These redress actions “will be calculated after a review of affected requests.”

In order to correct outstanding requests, “the defendants will be required to grant certain pending borrower requests.” These include “cosigner release and Servicemember Civil Relief Act benefits, correct credit reporting errors, and cease debt collection activities for certain borrowers who should have been eligible for Servicemember Civil Relief Act benefits but whose loans went into default,” states the CFPB.

Likewise, “the defendants will also be required to waive late fees for borrowers who should have had requests granted for Servicemember Civil Relief Act benefits, COVID-related forbearance, or cosigner release.”