[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Notices]
[Pages 67389-67390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27775]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Joint Statement of Principles on Student Loan Servicing

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Policy Guidance.

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SUMMARY: On September 29, 2015, the Bureau of Consumer Financial 
Protection (Bureau) joined with the U.S. Department of the Treasury and 
the U.S. Department of Education to release a Joint Statement of 
Principles on Student Loan Servicing as a framework for policymakers 
and market participants looking to improve student loan servicing 
practices, promote borrower success, and mitigate defaults. This Policy 
Guidance sets forth those joint principles.

DATES: This Policy Guidance is applicable November 2, 2015.

FOR FURTHER INFORMATION CONTACT: Michael Pierce, Program Manager, 
Office for Students and Young Americans, 1700 G Street NW., 20552, 202-
435-7938.

SUPPLEMENTARY INFORMATION: 

1. Policy Guidance

Joint Statement of Principles on Student Loan Servicing

    The U.S. Department of Education, the U.S. Department of the 
Treasury, and the Consumer Financial Protection Bureau have developed a 
Joint Statement of Principles on Student Loan Servicing as a framework 
to improve student loan servicing practices, promote borrower success 
and minimize defaults.\1\
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    \1\ On March 10, 2015, the President signed a Presidential 
Memorandum on a Student Aid Bill of Rights to Help Ensure Affordable 
Loan Repayment. The President directed the Secretary of Education, 
in consultation with the Secretary of the Treasury and the Director 
of the Consumer Financial Protection Bureau, to issue a report by 
October 1, 2015 on, among other things, recommendations concerning 
private and federal student loan servicing standards, flexible 
repayment opportunities for all student loan borrowers, and changes 
to bankruptcy laws. This Joint Statement of Principles on Student 
Loan Servicing informed this required report.
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General Principles for Student Loan Servicing \2\

    Consistent with their respective authorities, responsibilities, and 
missions, the Departments and the Bureau are committed to working 
together so that all student loan borrowers have access to (1) the 
information they need to repay their loans responsibly and avoid 
default; (2) protections so that they will be treated fairly even if 
they are struggling to repay their loans; and (3) mechanisms so that 
errors are resolved expeditiously and assurances that student loan 
servicers, both in the marketplace and through federally-contracted 
companies, are held accountable for their conduct. The following 
principles have been developed to advance these goals.
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    \2\ On September 30, 2015, the Consumer Financial Protection 
Bureau released Student Loan Servicing: Analysis of Public Input and 
Recommendations for Reform, analyzing comments the Bureau solicited 
from stakeholders including student loan borrowers, federal student 
loan servicers, private student loan market participants, policy 
experts, and state law enforcement officials and regulators as part 
of the Departments' and the Bureau's joint efforts to identify 
initiatives to strengthen student loan servicing.
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    There are four main types of postsecondary education loans under 
which borrowers have outstanding balances. Direct Loans are federal 
loans made directly to borrowers by the U.S. Department of Education 
through the William D. Ford Federal Direct Loan program. Federal Family 
Education Loan Program (FFELP) loans were originated by private lenders 
and guaranteed by the federal government. Federal Perkins Loans, which 
are co-funded by institutions of higher education and the federal 
government,

[[Page 67390]]

are originated and administered by participating institutions. Direct 
Loans, Perkins Loans and FFELP loans are made pursuant to Title IV of 
the Higher Education Act of 1965, as amended (HEA). The SAFRA Act 
enacted in 2010 ended new loan originations under the FFELP program in 
2010, but a significant number of loans remain outstanding. Private 
student loans are made by depository and non-depository financial 
institutions, states, institutions of higher education, and other 
entities. Private loans are not governed by the Higher Education Act, 
but are subject to other federal and state laws. All Federal Direct 
Loans and some FFELP loans are held by the Department of Education and 
serviced pursuant to contracts with loan servicers and collection 
contractors. Servicing for Perkins Loans, privately-held FFELP loans, 
and private student loans is provided at the direction of the current 
loan holder, and servicing activities for Perkins and FFELP loans are 
governed by rules and regulations laid out by law and through the U.S. 
Department of Education. The economic incentives to provide servicing 
that best serves borrowers', loan holders', and taxpayers' needs vary 
across the different types of student loans.
    In addition, the respective loan types come with varying levels of 
consumer protections and special benefits. Direct Loans, in general, 
offer borrowers more protections than private or FFELP loans. Borrowers 
with FFELP loans continue to consolidate into the Direct Loan program 
to access certain protections and benefits including the Public Service 
Loan Forgiveness Program, the nonaccrual of interest for servicemembers 
serving in areas of hostilities, and certain income-driven repayment 
plans. For federal loans, pursuant to provisions in the HEA, 
institutions of higher education are required to provide certain 
disclosures to borrowers that provide them with clear and helpful 
information about their loans and repayment options as part of schools' 
statutorily required entrance and exit counseling duties.
    The Departments and the Bureau intend to work closely with one 
another, consistent with their respective authorities, to strengthen 
servicing protections for student loan borrowers, and will seek to 
ensure that student loan servicing is, where appropriate:
     Consistent. Student loan borrowers and servicers alike 
would benefit from a clear set of expectations for what constitutes 
minimum requirements for services provided by student loan servicers 
and servicer communications with borrowers, including adequate and 
timely customer service. Student loan borrowers should expect effective 
student loan servicing, including, but not limited to, conduct related 
to payment processing, servicing transfers, customer requests for 
information, error resolution, and disclosure of borrower repayment 
options and benefits. Such conduct should account for and recognize 
variations in loan features, terms, and borrower protections.
     Accurate and Actionable. Student loan borrowers often 
depend on servicers to provide basic information about account 
features, borrower protections, and loan terms. It is critical that 
information provided to borrowers by student loan servicers be accurate 
and actionable. Information, including explanation and instructions 
regarding borrowers' loans and repayment options, should be presented 
in a manner that best informs borrowers, helps them achieve positive 
outcomes, and mitigates the risk and costs of default.
     Accountable. Student loan servicers, whether for-profit, 
not-for-profit or government agencies, should be accountable for 
serving borrowers fairly, efficiently and effectively. If servicers 
fall short and violate federal or state consumer financial laws, the 
HEA, contractual requirements, or federal regulations, borrowers, 
federal and state agencies and regulators, and law enforcement 
officials should have access to appropriate channels for recourse, as 
authorized under law.
     Transparent. The public, including student loan borrowers, 
may benefit from information about the performance of private and 
federal student loans and the practices of individual student loan 
lenders and servicers, including information related to loan 
origination, loan terms and conditions, borrower characteristics, 
portfolio composition, delinquency and default, payment plan 
enrollment, utilization of forbearance and deferment, the 
administration of borrower benefits and protections, and the handling 
of borrower complaints. The federal government already makes much of 
this information available for federal student loans, and private-
sector lenders and servicers should follow suit. Portfolio performance 
data, including data at the individual servicer level, should be 
available for all types of student loans.

2. Regulatory Requirements

    This Policy Guidance is a non-binding general statement of policy. 
It does not establish any binding legal requirements. It is therefore 
exempt from notice and comment rulemaking requirements under the 
Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because no 
notice of proposed rulemaking is required, the Regulatory Flexibility 
Act does not require an initial or final regulatory flexibility 
analysis. 5 U.S.C. 603(a), 604(a). The Bureau has determined that this 
Policy Guidance does not impose any new or revise any existing 
recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would be collections of 
information requiring OMB approval under the Paperwork Reduction Act, 
44 U.S.C. 3501, et seq.

    Dated: October 27, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-27775 Filed 10-30-15; 8:45 am]
BILLING CODE 4810-AM-P