WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released a report projecting that over the next two years, one-in-three rehabilitated student loan borrowers could be driven back into default due to gaps between student loan programs. The report examines debt collection and servicing problems plaguing the federal programs designed to help millions of defaulted student loan borrowers get on track and into affordable repayment plans. The Bureau estimates that the breakdowns along the path out of default will cost borrowers hundreds of millions of dollars, including over $125 million in unnecessary interest charges over the next two years. The Bureau is calling for an overhaul of these programs in order to help improve the recovery process for distressed consumers.
“The consumer protections promised under federal law should make it nearly impossible for the most vulnerable consumers to be trapped in default,” said CFPB Director Richard Cordray. “Today’s report shows that far too many of these borrowers continue to fall through the cracks of a flawed student loan system.”
The CFPB Student Loan Ombudsman’s Annual Report is available at: http://files.consumerfinance.gov/f/documents/102016_cfpb_Transmittal_DFA_1035_Student_Loan_Ombudsman_Report.pdf