On Wednesday, March 30, the Consumer Financial Protection Bureau (CFPB), a federal watchdog agency responsible for consumer protection in the financial services industry, sanctioned Edfinancial Services, a student-loan servicer, for allegedly making deceptive statements to student loan borrowers.
The CFPB is ordering Edfinancial to pay a $1 million civil money penalty, in addition to contacting all affected borrowers and providing them with accurate information.
- The Consumer Financial Protection Bureau (CFPB) has issued a $1 million fine to student-loan servicer Edfinancial for allegedly misleading borrowers about Public Service Loan Forgiveness (PSLF).
- The CFPB has accused Edfinancial of misrepresenting that Federal Family Education Loan Program (FFELP) lendees could not receive PSLF, that their payments were going toward PSLF without consolidating their loans, and that certain qualifying jobs were ineligible for PSLF, in addition to failing to mention PSLF when asked about forgiveness programs by borrowers.
- To benefit from the Department of Education's limited PSLF waiver, student loan borrowers will generally need to consolidate their loans and/or file a PSLF application.
Edfinancial Found in Violation of the Consumer Financial Protection Act
According to the CFPB, Edfinancial violated the Consumer Financial Protection Act by deceiving Federal Family Education Loan Program (FFELP) lendees about their eligibility for Public Service Loan Forgiveness (PSLF) by:
- Misrepresenting That FFELP Borrowers Could Not Receive PSLF: In some cases, Edfinancial reportedly told borrowers asking about PSLF that they were ineligible and failed to inform them they could become eligible by consolidating their FFELP loans into direct loans (in addition to other qualifying requirements), sometimes outright stating FFELP loans could not be consolidated.
- Misrepresenting That FFELP Borrowers Were Making Payments Towards PSLF Before Loan Consolidation: In other cases, Edfinancial either told or implied to borrowers that their FFELP loan payments would count toward the 10 years of monthly payments required for obtaining PSLF, even if they hadn't consolidated their FFELP loans into direct ones.
- Misrepresenting to Borrowers That Certain Jobs Were Not Eligible for PSLF: Edfinancial also reportedly stated that workers in certain eligible jobs were not qualify for PSLF, in addition to failing to mention entire qualifying sectors (i.e., nonprofit work) when discussing PSLF.
- Describing Forgiveness Programs to FFELP Borrowers Without Mentioning PSLF: Lastly, when borrowers asked about forgiveness options, Edfinancial reportedly limited the discussion to forgiveness options only available for FFELP loans without ever mentioning PSLF.
In response, the CFPB’s has ordered Edfinancial to pay a $1 million penalty, which will be deposited into the CFPB’s Civil Penalty Fund. Additionally, Edfinancial is required to contact all of its FFELP borrowers so they may have the chance to take advantage of the Department of Education’s limited PSLF waiver before it ends on Oct. 31, 2022.
The PSLF Program
In 2008, former-President George W. Bush signed legislation that established the PSLF program, which is available for student-loan borrowers working in public-service jobs or with a local, state, tribal, or federal government, in addition to certain nonprofit organizations. However, borrowers with FFELP loans must first consolidate them into direct loans in order to qualify.
In October 2021, the Department of Education's announced a limited PSLF waiver that extended benefits to FFELP borrowers. Under the waiver, any prior payments on a federal student loan by a public-service worker can count toward PSLF, including payments on FFELP loans. To benefit from this waiver, borrowers will need to consolidate their loans and/or file a PSLF application.