The CFPB has developed a “Fix It Form” that credit unions that service student loans may see.
On August 18, the CFPB released the Form, along with a press release and the Loan Ombudsman’s Midyear Report, in response to complaints borrowers have with using income-driving repayment plans tied to their federal student loans.
The press release and report summarizes complaints the CFPB has received related to private and federal student loans. These issues include:
- Application abyss: Generally, the income-driven repayment application process should take no more than two weeks. However, borrowers report that their applications sit under review for weeks or months at a time, leaving them to linger in an application abyss. These delays can cause borrowers to lose out on protections that can lower their monthly payment, save them money on interest charges, and start them on the path to loan forgiveness.
- Repayment rejection: Borrowers report being rejected because their application had missing information or because their servicer lost paperwork, without ever being notified by their servicer or being given a chance to fix the problem. Other borrowers report being rejected simply for checking the wrong box, without being given the opportunity to submit a corrected form. These errors discourage borrowers from restarting the application process, and some borrowers may choose to walk away from their loan, instead of remaining on the road to repayment.
- Recertification replay: For borrowers who successfully enroll in an income-based repayment plan, they may re-encounter the same obstacles each year since they need to certify their income and family size annually in order to keep an income-driven payment. Servicing practices related to recertification, particularly processing delays and wrongful rejections, can drive substantial and unnecessary increased costs for borrowers.
Last month, the Department of Education called for servicers to set better standards for handling income-driven repayment applications. The Department of Education issued guidance saying servicers must be more actively engaged with borrowers who do not have complete applications.
The CFPB’s Fix It Form can be used by servicers to help them address application problems. Servicers can use this Fix It Form to help borrowers understand whether their income-driven repayment application has been approved, denied, or needs to be corrected. When a borrower needs to make a correction or provide more information, servicers can use the Fix It Form to help consumers understand how to “fix it” and stay on track.
Credit unions that service student loans should review the form. The form directs the borrower to attach it to their Income Driven Repayment Application and includes respond by date for the credit union to return the form to the borrower.