Consumer Financial Protection Bureau Calls For Student Loan Servicing Reform

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The National Foundation for Credit CounselingⓇ (NFCCⓇ) recommends uniformity in the nonprofit counseling sector as member agencies are prepared to advise student borrowers.

The National Foundation for Credit Counseling (NFCC) is a nonprofit organization with members providing credit, housing, budget, and student loan counseling.

The National Foundation for Credit Counseling

The NFCC suggests that counselors working with clients and servicers can resolve disputes in real-time, reducing the need for a lengthy and painful complaint process.

The Consumer Financial Protection Bureau (CFPB) has published a detailed report based on the results of its public inquiry on student loan servicing practices. The findings highlight troubling customer service practices in the student loan servicing industry and include recommendations for reframing oversight of the student loan servicing marketplace.

The recommendations contained in the report are partly based on comments submitted to the CFPB after it launched a public inquiry into student loan servicing practices in May 2015. The National Foundation for Credit Counseling® (NFCC®) submitted comments about student loan servicing on behalf of its members and the nonprofit student loan counseling sector in July.

In its comments, the NFCC focused in part on the lack of a comprehensive statutory or regulatory framework providing uniform standards for the servicing of all student loans. The NFCC urged the CFPB to consider adopting a uniform definition of counseling so as to ensure that all student borrowers receive a consistently positive experience.

Among other issues, the NFCC addressed a number of the problems common to student loan servicing. Some servicers may fail to provide critical details that should be considered when a struggling borrower is selecting a forbearance option. More troubling, a borrower could be provided inaccurate or misleading information by a service agent. Although the CFPB has a reporting system for such consumer complaints, many consumers are not aware that they have been provided inaccurate information, which would prevent them from taking appropriate action. The NFCC suggests that counselors working with clients and servicers can resolve disputes in real-time, reducing the need for a lengthy and painful complaint process.

Addressing attendees of the NFCC Annual Leaders Conference in Indianapolis, Deputy Secretary of the Treasury Sarah Bloom Raskin said that it is time for servicers to take responsibility for the rate of student loan delinquency and default. “Student loan servicers may not be acting as the beacons we need them to be,” Raskin said. “We need to see increased enrollment in income-driven repayment plans, high touch servicing, and counseling that helps borrowers understand their options and sets them on a more secure financial path.”

The CFPB report catalogued a number of the errors that the NFCC and Deputy Secretary Raskin referred to in their comments. The report listed faulty servicing practices, systemic customer service issues, misaligned servicing incentives, and a lack of accountability in the student loan servicing market as key drivers of consumer distress. Ultimately, the report reached a similar conclusion to the Deputy Secretary’s, stating that “Policymakers and market participants should consider the framework for reform outlined in this report as they take necessary action to protect student loan borrowers from illegal practices, realign incentives to encourage better outcomes and seek to improve the level of service provided market-wide”.


The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation’s largest and longest serving national nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services. NFCC members annually help millions of consumers through more than 600 community-based offices nationwide. For free and affordable confidential advice through a reputable NFCC member, call (800) 388-2227, (en Español (800) 682-9832) or visit

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