Long hold times, inaccurate billing statements, more noted in CFPB review of student loan repayment resumption

The federal consumer protection agency on Friday issued a report on observations regarding borrowers’ return to federal student loan repayment that it says may hold serious implications for not only borrowers but the broader economy.

The “issue spotlight” released by the Consumer Financial Protection Bureau (CFPB) touches on the bureau’s oversight of student loan servicing practices in the early resumption of federal student loan repayments after more than three years of a payment pause related to the COVID-19 emergency. It said borrowers have faced long hold times when trying to reach their student loan servicers, significant delays in application processing times for income-driven repayment plans, and receiving inaccurate billing statements and disclosures.

The CFPB said it determined that the return to repayment of federally owned student loans presented significant consumer risks and that initiated its supervisory response due to the number of impacted consumers, which exceeds 28 million; consumer complaints and other field market intelligence; and the history of compliance issues by student loan servicers.

The report findings, anonymized and presented in aggregate form, provide no conclusions. But the bureau said they “may have serious implications for borrowers as well as for servicers’ compliance with state and federal consumer financial protection law.”

The bureau, in its release, summarized the findings as follows:

  • Long hold times and abandoned calls: The report finds that borrowers are frequently forced to wait on hold for more than an hour when calling their servicer, and many give up without ever receiving assistance. Many servicers were able to boost their financial performance by dramatically reducing staffing during the pandemic. However, servicers have not met the foreseeable borrower demand for help with their loans. Average call wait times to speak to a live representative have risen from 12 minutes in August 2023 to over 70 minutes in October 2023. As a result, roughly half of all calls were abandoned in October 2023, more than double August 2023’s rate of 17%. This is leaving borrowers unable to fix errors, get answers to questions, or enroll in an affordable repayment plan or cancellation plan.
  • Significant delays in processing income-driven repayment plan applications: Millions of income-driven repayment plan applications were submitted between August and October 2023. As of late October, servicers reported more than 1.25 million pending income-driven repayment plan applications – with more than 450,000 of those applications pending for more than 30 days with no resolution. Processing times vary across servicers, with some servicers taking five times longer than others to process applications. These delays put borrowers at risk for making significantly higher payments than they can afford. (Among several of the report’s findings is that across all servicers, each employee tasked with processing income-driven repayment applications by late October had on average 1,335 outstanding applications.)
  • Inaccurate and untimely billing statements: Borrowers are receiving faulty and confusing bills from servicers. Errors include listing premature due dates before the end of the payment pause, inflating monthly payment amounts due to the servicer using outdated poverty guidelines, or using the incorrect income when calculating a borrower’s new income-driven repayment plan payment. These mistakes can cause significant borrower confusion, and can further strain the servicers’ resources by forcing borrowers to contact their servicer to resolve the errors.

The bureau said supervision is ongoing, “and we will continue examining student loan servicers, monitoring of consumer complaints received about student loan servicers, and collaborating with federal and state partners, and enforcing the law where necessary.”

CFPB Report Identifies Challenges Faced by Borrowers in Resumption of Student Loan Payments

Issue Spotlight: Federal Student Loan Return to Repayment