CFPB Issues Consumer Advisory Regarding Student Loan Servicing

In light of its recently issued report on payment processing policies of private student lenders and loan servicers, the Consumer Financial Protection Bureau (CFPB) recently released an advisory entitled, “Consumer Advisory: Stop Getting Sidetracked by Your Student Loan Servicer.”

Since many borrowers are not able to refinance their student loans at today’s lower rates, the CFPB is suggesting that borrowers provide their servicers with instructions on how to handle any additional payments:

Your student loan servicer should listen to your instructions about which loan your additional payment goes toward when you submit your payment.

Here’s why providing instructions to your servicer can be a good idea:

  • If you direct any extra money to your highest interest rate loan first, you may save hundreds of dollars or more in extra interest payments and you may be able to get out of debt faster.
  • If you don’t tell them what to do, your servicer will apply extra payments as they see fit, in most cases spreading your money out across all of the loans on your account.
  • This means that you’ll pay down your debt slowly, and you’ll pay more money in interest over the life of your loan.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance.