On September 24, the CFPB announced the release of its annual report on the most pressing financial concerns facing servicemembers. This edition highlights that servicemembers are encountering student debt-related difficulties such as struggling to get help from student loan servicers, and transcript withholding by colleges or universities as a means to collect on student debt.
The report highlights several issues servicemembers face regarding student loans, especially after the resumption of federal loan payments in October 2023. According to the report, for servicemembers, particularly those stationed abroad or deployed, the return to repayment led to an increase in student loan-related complaints. The report’s key findings include:
- Challenges in contacting Loan Servicers. Servicemembers, veterans, and military families report long wait times and difficulties reaching their loan servicers, with frequent failures to resolve issues, especially for those stationed overseas due to time-zone differences.
- Servicing Errors with Income-Driven Repayment (IDR) Plans. Many servicemembers reported errors in calculating monthly payments under IDR plans, often due to changes in household income caused by frequent relocations, leading to higher payments or issues with Public Service Loan Forgiveness (PSLF) eligibility.
- Withholding of Transcripts. Colleges withholding transcripts for debts or fees can delay servicemembers’ educational progress and impede promotions or employment opportunities, given the frequent relocations military life requires.
- Additional Challenges for Older Veterans. Complaints from older veterans focused on fraud, scams, and issues with money transfers or virtual currencies.
Putting It Into Practice: The report underscores the CFPB’s commitment to shielding active service members and veterans from potentially harmful financial products or services. (previously discussed here, here, and here). CFPB reports often foreshadow areas of focus for guidance and future enforcement actions. As such, companies engaged in servicing active servicemember or veteran student loans should stay tuned for further developments. Additionally, colleges and universities that withhold transcripts to procure repayment from prior students should consider alternative collections strategies, as this practice is frequently in the Bureau’s sites.
