July 13, 2022
TO: All Federal Student Loan Servicers
RE: Best Practices for Promoting Public Service Loan Forgiveness
Promotion of the Public Service Loan Forgiveness (“PSLF”) program is a regulatory priority of the New York State Department of Financial Services (the “Department”), and I write to follow up on the Department’s letter of December 20, 2021, to your company regarding the PSLF program.
As you know, through the federal PSLF program, full-time government and certain non-profit employees may be eligible to have federal Direct Loans forgiven after making 120 qualifying monthly payments. As a result of the COVID-19 emergency, on October 6, 2021, the U.S. Department of Education (“USDOE”) announced certain changes to the PSLF program rules, including that it has temporarily waived certain requirements to make it easier for eligible borrowers to have their federal loans forgiven (the “PSLF Waiver”).1 Although borrowers only have until October 31, 2022, to take advantage of some parts of the PSLF Waiver program, many borrowers may not know about the opportunity and could miss out on this significant benefit.2
In its December 20, 2021, letter, the Department requested a Special Report describing what steps your company has taken to address the changes announced by USDOE to the PSLF program rules and similar requests were sent to other servicers. Based on its review of the servicers’ responsive submissions, the Department is now issuing this letter to identify potentially unfair, deceptive, or abusive acts or practices relating to the PSLF Waiver program and to identify best practices that servicers can undertake to help promote the PSLF Waiver. The Department will diligently enforce all servicer legal requirements concerning the PSLF program and will consider the extent to which servicers engaged in proactive measures to promote the PSLF Waiver in future supervisory examinations.
Potentially Unfair, Deceptive, or Abusive Conduct
The Special Reports revealed that some servicers are engaged in troubling practices that must be remediated as soon as possible.
Some servicers, for example, have failed completely to provide borrowers information about PSLF, including, for at least one servicer, on the mistaken assumption that the PSLF Waiver would not be relevant to borrowers with only FFELP loans. This view is incorrect: under the PSLF Waiver program, payments made on FFELP loans may be counted towards the required 120 payments for PSLF forgiveness for borrowers who consolidate their FFELP loans into Direct loans and submit a PSLF form on or before October 31, 2022. See USDOE Fact Sheet.
Similarly, several servicers have been referring borrowers to USDOE or even other servicers instead of being prepared to directly provide information regarding the PSLF waiver to borrowers. A servicer’s inability or refusal to provide accurate and complete information regarding the PSLF Waiver to borrowers, including those with FFELP or Perkins loans, raises the risk that the Department or other regulators may find that the servicer has engaged in unfair, deceptive, or abusive acts or practices.3 Servicers should be sure that its customer service representatives are properly trained and that call scripts are updated to ensure that representatives are able to provide material information regarding the PSLF Waiver to borrowers.
Many servicers have also not put any information about the PSLF Waiver on their websites. To avoid engaging in deceptive practices, the Department strongly encourages servicers to update their websites to include a dedicated PSLF information page that includes a description of the PSLF Waiver’s benefits, who is eligible for the waiver, the steps for using the waiver and the deadline for taking advantage of the waiver.4 An absence of information regarding PSLF and the PSLF Waiver may constitute a material omission where the servicer’s website otherwise discusses repayment options and relief available to struggling borrowers.
In addition, few servicers reported that they are taking steps to proactively inform borrowers about opportunities available through the PSLF Waiver: fewer than a third of the federal student loan servicers had sent proactive written communications informing borrowers of the PSLF Waiver, and only one servicer is attempting to ascertain from records of prior communications which borrowers might be able to take advantage of the waiver program. Because servicers are the primary contact for student loan borrowers about their federal loans, proactive communications by servicers are vital in promoting awareness of the potential benefits of the PSLF Waiver.
The Department encourages servicers to engage in the following best practices, including proactive communications with borrowers, to promote the PSLF Waiver.
- Within the next six weeks, servicers should review and enhance as necessary policies, procedures, training materials, and call scripts to detail accurately the eligibility requirements for PSLF, including the expanded benefits under the PSLF Waiver.
- Within the next six weeks, servicers should conduct a one-time comprehensive training program for its customer service representatives and their managers concerning the PSLF Waiver. The training program should include training on:
- Soliciting information from all borrowers with at least one FFELP or Perkins loan about whether the borrower’s employment may make him or her eligible for PSLF;
- Providing an overview of the PSLF Waiver; and
- The informational resources and tools available from the Servicer and USDOE regarding PSLF and the PSLF Waiver.
- Within the next six weeks, servicers should develop a written notice related to the PSLF Waiver. The notice should clearly and conspicuously provide the following information, or other information consistent with the rules and requirements articulated by USDOE at the time of the notice:
- Indicate that borrowers who have worked in public service may wish to learn more about the PSLF Waiver;
- Explain that for a limited time, under new temporary rules, prior payments or periods of repayment that previously did not qualify towards PSLF may now qualify regardless of loan type, repayment plan, or whether the payment was made in full or on time;
- Disclose that this change will apply to student loan borrowers with FFELP or Perkins loans if they consolidate those loans into Direct loans by October 31, 2022;
- Notify the borrower that if one or more of the borrower’s federal loans are FFELP or Perkins loans, the borrower needs to take the following affirmative action by October 31, 2022, to take advantage of the PSLF Waiver: (1) verify his or her loan types; (2) verify that he or she has employment that is eligible for the program; and (3) in order to qualify for the forgiveness program the borrower must (i) consolidate his or her FFELP or Perkins loans into Direct loans; and (ii) submit a PSLF form by October 31, 2022; and
- Provide a link to a USDOE website where borrowers can obtain more information about the PSLF Waiver.
- Servicers should provide a copy of the written notice referred to in Paragraph 3 above to all borrowers with at least one federal loan, preferably once a month for three months (e.g., in August and September, and October) prior to October 31, 2022. If the borrower has consented to electronic communications from the servicer, the notice should be sent directly to the borrower’s email address and not through a portal affiliated with the servicer. If the borrower has not consented to electronic communications, the notice should be sent by regular mail.
- Servicers should direct customer service representatives to take the following steps on all incoming calls received for at least a two-month time period leading up to October 31, 2022, from borrowers who have one or more FFELP or Perkins loans
- Inquire whether the borrower has or has had a public service job such as government work or work for nonprofit organizations at any time since October 1, 2007;
- Inquire whether the borrower is interested in learning more about the PSLF Waiver;
- If the borrower responds in the affirmative to either question asked pursuant to Paragraph 6(a) and (b), the customer service representative should provide an overview of the PSLF Waiver and offer to forward the borrower written information regarding PSLF. If the borrower agrees to receipt of written information, the Servicer’s customer service representative will provide the notice referred to in Paragraph 3 of this letter by email or regular mail as appropriate.
- Servicers should develop and implement a comprehensive call monitoring program to ensure that the Servicer’s customer service representatives and their managers are providing accurate and complete information about the PSLF Waiver.
- Servicers should update its website if necessary to provide accurate information about the PSLF Waiver, including eligibility requirements, the steps required to qualify, and any associated time frames. This information would not merely be a link to other information but would be based on information about PSLF that is released by USDOE.
- Servicers should ensure that a clear and conspicuous notice on borrowers’ online account pages informs the borrower that, if he or she is employed in public service, such as by a government or nonprofit employer, and has federal loans, the borrower may be eligible for PSLF. Such notice shall also link to the page on the Servicer’s website where borrowers can obtain more information on PSLF and the PSLF Waiver.
We request that your company contact Terry McMahon, Associate Counsel, Consumer Examinations, at [email protected] by July 19, 2022 to set up a telephonic meeting to discuss your company’s Special Report submission, the extent that your company has taken additional steps to promote awareness of the PSLF Waiver since its submission of the Special Report, and whether your company can commit to undertaking the best practices described in this letter.
/s/ Serwat Farooq
Consumer Protection and Financial Enforcement Division
1 See USDOE, Fact Sheet: Public Service Loan Forgiveness Overhaul, available at https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul (“USDOE Fact Sheet”).
2 On July 6, 2022, USDOE proposed regulations to incorporate some of the PSLF Waiver provisions into regulations. However, borrowers who seek to have payments on Federal Family Education Loan Program (“FFELP”) loans counted towards loan forgiveness still need to apply for PSLF before October 31, 2022. See USDOE, Education Department Releases Proposed Regulations to Expand and Improve Targeted Relief Programs, available at https://www.ed.gov/news/press-releases/education-department-releases-proposed-regulations-expand-and-improve-targeted-relief-programs.
3 See Consent Order between the Department and Conduent Education Services, LLC, available at https://www.dfs.ny.gov/system/files/documents/2019/01/ea190104_conduent.pdf (“Conduent Consent Order”), at ¶¶ 17-21 (resolving the Department’s finding that the servicer misinformed borrowers regarding their eligibility for PSLF forgiveness). In addition, both the CFPB and USDOE have issued public reminders to federal student loan servicers of their responsibilities to inform borrowers about and facilitate participation in the PSLF Waiver. See CFPB Bulletin 2022-03: Servicer Responsibilities in Public Service Loan Forgiveness Communications, available at https://files.consumerfinance.gov/f/documents/cfpb_bulletin_2022-03_servicer-responsibilities-in-public-service-loan-forgiveness.pdf; FSA Letter to FFEL Program Participants – Responsibilities to Borrowers Seeking to Benefit from the Public Service Loan Forgiveness Program (FFEL-22-01), dated March 30, 2022, available at https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2022-03-30/fsa-letter-ffel-program-participants-responsibilities-borrowers-seeking-benefit-public-service-loan-forgiveness-program.
4 See, e.g., Conduent Consent Order, at ¶¶ 17-21 (including a Department finding that the servicer failed to adequately inform borrowers as to their eligibility for PSLF where, among other things, PSLF was not referenced at all on the servicer’s website).