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Federal Register / Vol. 86, No. 128 / Thursday, July 8, 2021 / Notices
instructions. Additionally, examiners continued to find that servicers engaged in unfair acts or practices related to providing inaccurate monthly payment amounts to consumers after a loan transfer, as previously discussed in Supervisory Highlights.104
2.10.1

Public Service Loan Forgiveness
PSLF may provide significant relief for consumers that work at 501c3
nonprofits; government organizations;
or other types of non-profit organizations that provide certain types of qualifying public services. Under the program, consumers that make 120
qualifying payments on their Direct Loans while working for an eligible employer and repaying under an eligible repayment plan may have the balance of their loans forgiven. There is significant confusion about eligibility for PSLF, which is further complicated by the relative complexity of student loan types and terms. Consequently, examiners observed borrowers with Federal Family Education Loan Program FFELP loans requesting information from servicers about their eligibility for PSLF or inquiring about terms of the program.
While FFELP loans are not initially eligible for PSLF, FFELP borrowers can consolidate into a Direct Consolidation Loan, which is eligible. Once consolidated, the consumer can start making eligible payments toward the 120 needed for forgiveness. Direct Consolidation Loan borrowers are also eligible for other benefits like improved income-driven repayment options, while their FFELP loan counterparts are not.
Examiners observed that servicers regularly provide FFELP borrowers information about PSLF. Examiners found that servicers regularly provided inaccurate information about eligibility for PSLF or Direct Consolidation Loans, resulting in deceptive acts or practices described below.

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2.10.2 Misrepresenting the Effect of Employer Certification Forms In examinations of student loan servicers, examiners identified a deceptive act or practice where servicer employees represented to FFELP loan borrowers that they could submit their employer certification forms ECF to receive a determination on whether their employers are eligible employers for PSLF. Yet under PSLF program guidelines, FFELP borrowers who submit an ECF prior to consolidation into a Direct Loan will be rejected, 104 Supervisory
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without any determination about employer eligibility.
The servicers representations are likely to mislead borrowers into believing that they should submit an ECF prior to consolidation to receive confirmation that their employers are eligible. Consumers interpretation was reasonable under the circumstances and they were likely to be misled by the servicers representations, given the specificity of agents statements and the fact that agents routinely provided information about the PSLF program.
FFELP borrowers were likely interested in entering the PSLF program as soon as possible, so that they could begin making the 120 payments required for forgiveness. The agents information was material because it was likely to affect FFELP borrowers conduct in taking the steps necessary to enter PSLFmost notably, consolidating their loansand could delay these borrowers entry into the program by the time it takes to go through the ECF process.
2.10.3 Misrepresenting Eligibility of FFELP Loans for PSLF
Examiners found that servicers engaged in a deceptive act or practice by advising borrowers with FFELP loans that the loans could not become eligible for PSLF.
Consumers with FFELP loans can consolidate their loans into a Direct Consolidation Loan and become eligible for PSLF. Examiners found that during calls servicers represented to consumers with FFELP loans that they had no potential course of action to become eligible for PSLF. This representation was likely to mislead consumers because, in fact, their loans could become eligible through consolidation.
Consumers interpretation was reasonable under the circumstances because they reasonably believed that they had made their interest in eligibility for PSLF clear, and reasonably interpreted the servicers representations to mean that they could not take steps to qualify for PSLF. The representations were material because consumers called to inquire about loan forgiveness and if they had received accurate information may have taken steps to convert their FFELP loans to Direct Loans.
2.10.4 Misrepresenting Employer Types Eligible for PSLF
Examiners found that servicers risked engaging in a deceptive act or practice by informing borrowers interested in the PSLF program that they are only eligible if their employer is a nonprofit. The PSLF program provides loan forgiveness for eligible Federal student loans after
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ten years of payments by consumers who meet certain requirements, including that they work for a qualifying employer. Qualifying employers include local, State, Federal or tribal government entities; 501c3
nonprofits; and or other types of nonprofit organizations that provide certain types of qualifying public services.
Servicers stated in calls that consumers could be eligible for PSLF if they worked for nonprofits but did not mention that government employees and other types of employees are also eligible. This statement created the net impression that only employees of nonprofits were eligible. This was likely to mislead consumers, because other employment types are also eligible. This was a reasonable interpretation under the circumstances because servicers routinely provide consumers with information about eligibility for various programs. Finally, the representation was material to eligible consumers decision regarding whether to pursue PSLF. As a result of examiner findings, the servicers implemented a new training program for agents.
2.10.5 Failure To Reverse the Consequences of Automatic Natural Disaster Forbearances Examiners identified unfair practices related to enrollment in natural disaster forbearances at entities servicing private student loans. Generally, student loan borrowers become eligible for a natural disaster forbearance when they, or their cosigners, reside in a zip code impacted by a declared natural disaster. In most situations this forbearance is opt-in, allowing consumers to contact their servicer and request the payment relief.
However, at some servicers, examiners identified that certain populations of loans were automatically enrolled in the forbearance without a specific request from the consumereven if they were otherwise current on their loans. Within this subset of consumers whose accounts were automatically placed into a natural disaster forbearance, examiners identified two unfair practices.
First, examiners noted that despite the natural disaster declaration, some consumers did not want to be enrolled in the forbearance and requested to return to repayment. Often consumers identified negative consequences of forbearance and complained to their servicer about enrollment. For example, forbearance resulted in certain consumers losing payment incentives such as interest rate reductions for making on-time payments. It also resulted in consumers accruing unpaid interest during the period. And
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