WASHINGTON Dec 3 The U.S. consumer financial
watchdog will soon start supervising the seven largest student
loan servicers to ensure they treat borrowers fairly and comply
with federal consumer laws, the agency said on Tuesday.
The Consumer Financial Protection Bureau has taken a broad
interest in the burden of student loan debt, which it says now
totals $1.2 trillion and saddles many borrowers with debt that
takes years to repay.
More than 40 million borrowers with non-bank student loan
debt depend on companies that manage borrowers' accounts and
The agency said it has found a concerning resemblance of
problems encountered by student loan borrowers dealing with
servicers and those faced by homeowners dealing with mortgage
Student loan borrowers have complained about being charged
late fees as a result of processing mistakes by the servicers,
lost paperwork and poor communication.
"Student loan borrowers should be able to rest assured that
when they make a payment toward their loans, the company that
takes their money is playing by the rules," said CFPB Director
The agency already has oversight over the student loan
servicing activities of large banks with more than $10 billion
Under a new rule set to take effect on March 1, the CFPB
would expand its supervision to non-bank student loan servicers
that handle more than 1 million accounts, regardless of whether
they include federal or private loans.
The CFPB said seven companies fall into that category. It
did not name the companies but said they service in total more
than 49 million accounts, which represents the bulk of the
market. The CFPB said it will also look into smaller companies
if there is reasonable cause to do so.
The U.S. Department of Education contracts several private
companies to handle student loan services, including Sallie Mae,
Great Lakes Education Loan Services and Nelnet.
While all other forms of debt have fallen since the economic
crisis, student loan debt has grown and is now the
second-largest form of U.S. consumer debt after mortgage debt.
"Managing this debt load can be a challenge for borrowers -
especially for those who run into trouble, facing a financial
shock or a bout of unemployment," Cordray said. "We will be
keeping a watchful eye over any servicing company that engages
in unfair or deceptive acts or practices toward student loan