Lawsuit: CFPB Ignoring Mismanagement Of Public Service Student Loan Forgiveness A nonprofit student loan group alleges that the Consumer Financial Protection Bureau has abandoned its duty to police widespread mismanagement of a loan forgiveness program for public service workers.

Consumer Protection Agency Is Failing Student Loan Borrowers, Lawsuit Says

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A nonprofit student loan group is suing the nation's most powerful consumer watchdog agency. It's alleging that the Consumer Financial Protection Bureau has fallen down on the job and is not stopping widespread mismanagement of a loan forgiveness program. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Natalia Abrams is the founder of Student Debt Crisis, a nonprofit that works both on policy issues and directly with borrowers - and lately, a lot more borrowers than she ever expected.

NATALIA ABRAMS: Over the past year, I have spoken with hundreds of borrowers, sometimes multiple borrowers, every single day, and had to break their hearts.

ARNOLD: Break their hearts, she says, because of a program created by Congress in 2007 called Public Service Loan Forgiveness. It promises firefighters, public defenders, teachers and others that if they make payments for 10 years, the remainder of their loans will be forgiven. But Abrams says the program has been badly mismanaged, and a lack of government oversight has created such a mess that her organization is getting overwhelmed.

ABRAMS: We are suing the Department of Education and the CFPB because they are not doing their jobs.

ARNOLD: Actually, 99% of people are getting rejected by this program, and many say they're being treated unfairly.

JEREMY: My decision to be a public servant, join the military, was 100% based on that government promise.

ARNOLD: Jeremy now works as a police officer in Michigan. He doesn't want us to use his last name because of his police work. He says he and his wife, who's a teacher, both have made student loan payments for more than eight years. But he says they both kept getting bad advice from companies that manage student loans for the Ed Department. They're called loan servicers. He says call center workers steered him and his wife into making changes with their loans that disqualified them, so their combined $119,000 in student debt is not getting forgiven.

JEREMY: They tell her that she only has, you know, one qualifying payment. And I've got to watch her cry and tell her it's going to be OK. And she tells me that she should have done something else.

ARNOLD: Jeremy says his wife loves her job but regrets becoming a teacher because she doesn't make enough to pay off all that debt.

JEREMY: Hard not to feel betrayed, but it's just disbelief.

ARNOLD: The lawsuit alleges that the Consumer Financial Protection Bureau, which is tasked with protecting student loan borrowers, hasn't been doing oversight of loan servicing companies despite thousands of complaints. The lawsuit cites an NPR report about a turf fight between the CFPB and the Department of Education. The Ed Department argues that the CFPB doesn't have jurisdiction over federal student loans. Critics say that's outrageous, though, because we're talking about more than $1.5 trillion worth of federal student loans. And they say there needs to be a lot more oversight.

DEEPAK GUPTA: This lawsuit is asking the court to order the CFPB to do its job.

ARNOLD: That's Deepak Gupta, a former top attorney at the Consumer Protection Bureau. He says the law is very clear that the CFPB should be performing oversight here. But since the Trump administration took over control of the bureau, he says it hasn't been doing that.

GUPTA: The Consumer Financial Protection Bureau is completely abdicating its legal responsibility to oversee the vast majority of student loan debt.

ARNOLD: The CFPB did not immediately comment. The industry group for loan servicers tells NPR that servicers do the best they can working with millions of borrowers and complex loan programs and that they offer feedback to Congress on how to make improvements. In a statement, the Department of Education blamed Congress and the Obama administration for the high denial rates and said it has now improved internal processes with the aim of helping borrowers.

Chris Arnold, NPR News.

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