The federal agency in charge is the Consumer Financial Protection Bureau (CFPB). The CFPB was created by the Dodd-Frank law in response to the financial meltdown of 2008.
The targets of the CFPB are the firms that service the loans. They do not make the loans. They are gatekeepers for banks and other companies that make student loans. The seven largest loan servicers handle more than 49 million accounts.
When students want to modify or defer their loans, they go to student-loan servicers. The CFPB already regulates companies owned or run by banks. Now they will monitor the non-bank firms. For example, Sallie Mae Inc. is a student loan giant.
The CFPB says “Borrowers have complained that they have had trouble making prepayments or partial payments on their loans. Their paperwork was often lost and processing errors were made. This resulted in in late fees.”
Observers say the situation is like the mortgage scandals of 2008.
Sallie Mae says it has been working with the CFPB. A spokesperson cited, “Our 40-year history of helping customers choose the payment program that fits their needs and positions them to succeed.”
One in five U.S. households has a student loan.
Source: The Los Angeles Times December 2, 2013