The Department of Education announced that it will no longer work with the Consumer Financial Protection Bureau (CFPB) when it comes to combating student loan fraud.
The latest announcement comes on the heels of other moves by the Department of Education, headed by Secretary of Education Betsy DeVos, to undo Obama-era policies.
Why is the Department of Education cutting ties with the CFPB?
In 2011 and 2014, the Department of Education entered into two Memorandums of Understanding with the CFPB. These were designed to allow for cooperation in gathering information about loan servicing complaints and enforcing actions against servicers for some of their practices.
A letter sent to CFPB Director Richard Cordray accused the bureau of overstepping boundaries in pursuing cases of student loan fraud. The letter was signed by Kathleen Smith, the acting assistant secretary of the Office of Postsecondary Education, and A. Wayne Johnson, the new COO of the Federal Student Aid office.
The Department of Education claimed CFPB complaints related to Title IV federal student loans should be directed to the Department within 10 days of receipt. Instead, the letter claims, the CFPB was taking matters into its own hands.
“The CFPB’s intervention in this area adds confusion to borrowers and servicers who now hear conflicting guidance related to the Title IV student loan services for which the Department is responsible,” read the letter.
What is the CFPB response?
“We are surprised and disappointed to learn the Education Department is planning to terminate our Memoranda of Understanding, which established the foundation for some very successful collaborations,” said David Mayorga, a CFPB spokesperson, in a statement sent to Student Loan Hero.
“We have not previously heard any concerns as we have worked together to make sure that all student loan borrowers are treated fairly, with respect and dignity,” he added.
In the past, the CFPB has gone after student loan servicers for practices that they feel are harmful to borrowers. Additionally, the CFPB has shed light on practices by servicers that keep high-risk borrowers from enrolling in affordable repayment plans.
By ending information-sharing with the CFPB, the Department of Education could head off efforts by the CFPB to enforce actions on student loan servicers that aren’t acting in the best interests of borrowers.
“The Consumer Bureau has statutory responsibilities to protect student loan borrowers — like all consumers — from practices that violate the laws we enforce and we would like to continue to work with the Education Department toward our shared goals,” Mayorga said.
Will this move help student loan borrowers?
The Department of Education claimed ending cooperation with the CFPB will aid in protecting borrowers. Further, in an Aug. 31 statement announcing new hires, DeVos claimed that protecting students is a top priority.
However, since the Department of Education began rolling back policies from the Obama administration, there has been an uptick in complaints against student loan servicers. But ending cooperation with the CFPB is part of the Department of Education’s plan to protect borrowers, and some agree with the move.
Representative Virginia Foxx (R-N.C.) agreed with the move to stop cooperation, according to Inside Higher Ed. Foxx insisted that the partnership with the CFPB was doing more harm than good:
“[I]t was a mistake for the Obama administration to have the Department of Education let the CFPB abuse its privilege on these matters,” she said in a statement.
Meanwhile, consumer advocates decried the decision to cut the CFPB out of complaints related to student loan fraud.
The National Consumer Law Center (NCLC) said the 2011 memorandum was ordered to help the Department of Education, which was failing at its mandate to adequately protect consumers.
The memorandum was designed “to collaborate to ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their private education or federal student loans.”
An NCLC statement said, “The claim that the CFPB ‘unilaterally’ expanded its oversight role over servicers and collectors of federal student loans is unfounded … DeVos is prioritizing the interests of predatory for-profit schools, debt collectors, and trouble student loan services over the interests of student loan borrowers.”
The NCLC also pointed to the hiring of industry insiders for top positions in the administration.
A. Wayne Johnson, head of the Financial Student Aid office, is a former student loan CEO. Julian Schmoke, whom will lead the student aid enforcement unit, worked as an administrator for a university fined for fraudulent practices.
Student loan borrowers must learn their rights
The CFPB is increasingly isolated and is, according to Inside Higher Ed, one of the few federal agencies to step up enforcement under the Trump administration.
If the government is stepping away from consumer protection, it’s vital for student loan borrowers to understand their rights and educate themselves on their options.
Here are some resources that can help you understand your rights:
- Battling Your Servicer? How a Student Loan Ombudsman Can Help
- The Complete Guide to Income-Driven Repayment Plans for Federal Student Loans
- 4 Ways the New Student Aid Bill of Rights Will Impact Your Loans
- 3 Important Things Your Student Loan Exit Counselor Didn’t Tell You
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of June 15, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 6/15/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.19% effective June 10, 2020.