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The Consumer Financial Protection Bureau said Thursday that it has launched a “public inquiry” into the practices of companies that collect and manage student loan payments.
Officials from the bureau are soliciting public feedback on a range of issues relating to student loan servicers, including whether the federal government should more tightly regulate the companies. They are also seeking input on whether the federal government should pay the servicers for federal loans differently in order to provide more incentives for them to help struggling borrowers avoid default.
The Education Department has previously defended its current loan-serving model, which involves hiring four main companies to manage payments of federal student loan borrowers. Consumer advocates and some Senate Democrats have criticized the department’s oversight of those loan servicers.
The CFPB supervises large student loan servicing companies, including the four main federal loan servicers.
The public comments are “meant to find ways to put the ‘service’ back into the student loan servicing market and help people avoid unnecessary defaults,” CFPB Director Richard Cordray was to say at a student debt hearing in Wisconsin Thursday, according to prepared remarks.
The feedback will also, officials said, inform a joint report with the Education and Treasury Departments about loan servicing. That review was ordered by President Obama earlier this year as part of several executive actions his administration dubbed a Student Aid Bill of Rights.
