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What Does the New CFPB Ruling Mean for My Student Loan Debt?

By Georgie Miller – Mar 23, 2014 at 12:22PM

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The Consumer Financial Protection Bureau recently announced that it would begin monitoring non-bank student loan servicers.

To answer this question, maybe it is best to first ask another question: what is the CFPB, anyway? CFPB, or Consumer Financial Protection Bureau, is a government organization established by the Dodd-Frank Act.

CFPB and the student loan connection
"Our mission is to make markets for consumer financial products and services work for Americans -- whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products," the CFPB states on its About Us page.

In other words, they aim to protect us from being taken advantage of financially. How do student loans fit into the picture? Well, according to the CFPB, student loan debt is the nation's second largest consumer debt market. And unfortunately, student loan servicers may act in ways that disadvantage borrowers.

This is a cause for some worry, since student loans can impact your credit score. A bad credit score can prevent you from qualifying for the best credit cards or getting the best mortgage rates. In other words, the potential impact on the rest of your financial life is huge. Fortunately, the CFPB will soon start monitoring servicers of federal or private student loans who have more than one million borrower accounts. That's almost 50 million borrowers who will soon have the advantage of CFPB monitoring on their side.

Student loan complaints the CFPB will monitor
There are three main concerns identified by student loan borrowers. Borrowers complained of difficulties with pre-payments, partial payments and transfer of service. The CFPB will attempt to monitor these issues and, if necessary, take corrective action.

First, borrowers trying to pay off their loans early complained that additional payments were not always applied to their accounts in the manner specified and intended.

Second, some borrowers complain that, when they are unable to make their full payment, any money they dopay is applied to their accounts in ways that maximize fees. If you haven't consolidated your student loans and have multiple accounts with the same servicer, spreading the payments equally across all accounts means they'll all trigger late fees. By contrast, paying as many accounts as possible in full sequentially would result in fewer late charges.

Third, borrowers encountered difficulties when their accounts were transferred from one servicer to another. If your loans are federal direct loans, sometimes the government has your account transferred to another servicer, and there's nothing you can do about it.

The original article: What does the new CFPB ruling mean for my student loan debt? appeared on

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