[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Notices]
[Pages 67389-67390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27775]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
Joint Statement of Principles on Student Loan Servicing
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Policy Guidance.
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SUMMARY: On September 29, 2015, the Bureau of Consumer Financial
Protection (Bureau) joined with the U.S. Department of the Treasury and
the U.S. Department of Education to release a Joint Statement of
Principles on Student Loan Servicing as a framework for policymakers
and market participants looking to improve student loan servicing
practices, promote borrower success, and mitigate defaults. This Policy
Guidance sets forth those joint principles.
DATES: This Policy Guidance is applicable November 2, 2015.
FOR FURTHER INFORMATION CONTACT: Michael Pierce, Program Manager,
Office for Students and Young Americans, 1700 G Street NW., 20552, 202-
435-7938.
SUPPLEMENTARY INFORMATION:
1. Policy Guidance
Joint Statement of Principles on Student Loan Servicing
The U.S. Department of Education, the U.S. Department of the
Treasury, and the Consumer Financial Protection Bureau have developed a
Joint Statement of Principles on Student Loan Servicing as a framework
to improve student loan servicing practices, promote borrower success
and minimize defaults.\1\
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\1\ On March 10, 2015, the President signed a Presidential
Memorandum on a Student Aid Bill of Rights to Help Ensure Affordable
Loan Repayment. The President directed the Secretary of Education,
in consultation with the Secretary of the Treasury and the Director
of the Consumer Financial Protection Bureau, to issue a report by
October 1, 2015 on, among other things, recommendations concerning
private and federal student loan servicing standards, flexible
repayment opportunities for all student loan borrowers, and changes
to bankruptcy laws. This Joint Statement of Principles on Student
Loan Servicing informed this required report.
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General Principles for Student Loan Servicing \2\
Consistent with their respective authorities, responsibilities, and
missions, the Departments and the Bureau are committed to working
together so that all student loan borrowers have access to (1) the
information they need to repay their loans responsibly and avoid
default; (2) protections so that they will be treated fairly even if
they are struggling to repay their loans; and (3) mechanisms so that
errors are resolved expeditiously and assurances that student loan
servicers, both in the marketplace and through federally-contracted
companies, are held accountable for their conduct. The following
principles have been developed to advance these goals.
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\2\ On September 30, 2015, the Consumer Financial Protection
Bureau released Student Loan Servicing: Analysis of Public Input and
Recommendations for Reform, analyzing comments the Bureau solicited
from stakeholders including student loan borrowers, federal student
loan servicers, private student loan market participants, policy
experts, and state law enforcement officials and regulators as part
of the Departments' and the Bureau's joint efforts to identify
initiatives to strengthen student loan servicing.
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There are four main types of postsecondary education loans under
which borrowers have outstanding balances. Direct Loans are federal
loans made directly to borrowers by the U.S. Department of Education
through the William D. Ford Federal Direct Loan program. Federal Family
Education Loan Program (FFELP) loans were originated by private lenders
and guaranteed by the federal government. Federal Perkins Loans, which
are co-funded by institutions of higher education and the federal
government,
[[Page 67390]]
are originated and administered by participating institutions. Direct
Loans, Perkins Loans and FFELP loans are made pursuant to Title IV of
the Higher Education Act of 1965, as amended (HEA). The SAFRA Act
enacted in 2010 ended new loan originations under the FFELP program in
2010, but a significant number of loans remain outstanding. Private
student loans are made by depository and non-depository financial
institutions, states, institutions of higher education, and other
entities. Private loans are not governed by the Higher Education Act,
but are subject to other federal and state laws. All Federal Direct
Loans and some FFELP loans are held by the Department of Education and
serviced pursuant to contracts with loan servicers and collection
contractors. Servicing for Perkins Loans, privately-held FFELP loans,
and private student loans is provided at the direction of the current
loan holder, and servicing activities for Perkins and FFELP loans are
governed by rules and regulations laid out by law and through the U.S.
Department of Education. The economic incentives to provide servicing
that best serves borrowers', loan holders', and taxpayers' needs vary
across the different types of student loans.
In addition, the respective loan types come with varying levels of
consumer protections and special benefits. Direct Loans, in general,
offer borrowers more protections than private or FFELP loans. Borrowers
with FFELP loans continue to consolidate into the Direct Loan program
to access certain protections and benefits including the Public Service
Loan Forgiveness Program, the nonaccrual of interest for servicemembers
serving in areas of hostilities, and certain income-driven repayment
plans. For federal loans, pursuant to provisions in the HEA,
institutions of higher education are required to provide certain
disclosures to borrowers that provide them with clear and helpful
information about their loans and repayment options as part of schools'
statutorily required entrance and exit counseling duties.
The Departments and the Bureau intend to work closely with one
another, consistent with their respective authorities, to strengthen
servicing protections for student loan borrowers, and will seek to
ensure that student loan servicing is, where appropriate:
Consistent. Student loan borrowers and servicers alike
would benefit from a clear set of expectations for what constitutes
minimum requirements for services provided by student loan servicers
and servicer communications with borrowers, including adequate and
timely customer service. Student loan borrowers should expect effective
student loan servicing, including, but not limited to, conduct related
to payment processing, servicing transfers, customer requests for
information, error resolution, and disclosure of borrower repayment
options and benefits. Such conduct should account for and recognize
variations in loan features, terms, and borrower protections.
Accurate and Actionable. Student loan borrowers often
depend on servicers to provide basic information about account
features, borrower protections, and loan terms. It is critical that
information provided to borrowers by student loan servicers be accurate
and actionable. Information, including explanation and instructions
regarding borrowers' loans and repayment options, should be presented
in a manner that best informs borrowers, helps them achieve positive
outcomes, and mitigates the risk and costs of default.
Accountable. Student loan servicers, whether for-profit,
not-for-profit or government agencies, should be accountable for
serving borrowers fairly, efficiently and effectively. If servicers
fall short and violate federal or state consumer financial laws, the
HEA, contractual requirements, or federal regulations, borrowers,
federal and state agencies and regulators, and law enforcement
officials should have access to appropriate channels for recourse, as
authorized under law.
Transparent. The public, including student loan borrowers,
may benefit from information about the performance of private and
federal student loans and the practices of individual student loan
lenders and servicers, including information related to loan
origination, loan terms and conditions, borrower characteristics,
portfolio composition, delinquency and default, payment plan
enrollment, utilization of forbearance and deferment, the
administration of borrower benefits and protections, and the handling
of borrower complaints. The federal government already makes much of
this information available for federal student loans, and private-
sector lenders and servicers should follow suit. Portfolio performance
data, including data at the individual servicer level, should be
available for all types of student loans.
2. Regulatory Requirements
This Policy Guidance is a non-binding general statement of policy.
It does not establish any binding legal requirements. It is therefore
exempt from notice and comment rulemaking requirements under the
Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because no
notice of proposed rulemaking is required, the Regulatory Flexibility
Act does not require an initial or final regulatory flexibility
analysis. 5 U.S.C. 603(a), 604(a). The Bureau has determined that this
Policy Guidance does not impose any new or revise any existing
recordkeeping, reporting, or disclosure requirements on covered
entities or members of the public that would be collections of
information requiring OMB approval under the Paperwork Reduction Act,
44 U.S.C. 3501, et seq.
Dated: October 27, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-27775 Filed 10-30-15; 8:45 am]
BILLING CODE 4810-AM-P