On December 16, the CFPB released its Supervisory Highlights: Special Edition Student Lending, Issue 36 (Winter 2024) which examined federal and private student loans and identified alleged violations in student loan refinancing, private lending and servicing, debt collection, and federal loan servicing. According to the report, the student loan market has total outstanding balances of approximately $1.77 trillion. The Bureau discussed risks associated with refinancing federal student loans through private lenders, which can result in the loss of important federal protections. CFPB examiners also identified deceptive practices by private lenders who allegedly misled borrowers about the loss of these benefits when refinancing.

The report also addressed “illusory benefits” offered by private lenders, such as unemployment and disability protections, which were often denied or misrepresented. Additionally, it discussed noteholder liability in cases of school misconduct, where borrowers were reportedly misled about their rights to challenge fraudulent loans. The Bureau also found that some private lenders engaged in illegal collection tactics, including the false threat of legal action, and withheld academic transcripts or access to classes as a remedy for default.

Finally, the Supervisory Highlights examined the servicing of federal student loans during the return to repayment after the Covid-19 payment pause and identified violations such as: (i) inadequate ways for borrowers to manage loan issues by phone; (ii) deceptive billing statements; (iii) unauthorized debiting of funds; and (iv) excessive delays in processing income-driven repayment plan applications.

The Supervisory Highlights argued a need for improved oversight and corrective actions to ensure compliance with federal consumer financial laws and addressed the specific issues identified in the report.