If the CFPB is eliminated or diminished, student loan borrowers risk losing vital loan protections … More
What Student Loan Borrowers Could Lose If The CFPB Is Gutted
The Consumer Financial Protection Bureau has been a watchdog for student loan borrowers since its inception. The agency’s future is in doubt amid political and legal threats, raising the question: What happens to student loan borrowers if the CFPB is eliminated or severely weakened? This isn’t a hypothetical. President Donald Trump’s administration had already taken steps to dismantle the agency, including closing the CFPB’s headquarters, ordering employees to cease most work, and terminating over 100 probationary and term employees. While a district court judge had issued a temporary injunction enjoining the agency’s Acting Director Russell Vought from carrying out what she characterized as a plan to “disable and dismantle” the agency, an appeals court granted a temporary stay on the judges order on April 11. The Court of Appeals expedited the Trump administration’s appeal and it will be argued on May 16.
In short, the fate of the agency is in limbo and borrowers could lose a critical protector. The CFPB helps oversee student loan servicers and lenders, curbing predatory practices and ensuring borrowers have somewhere to turn with complaints. If the bureau goes away or is greatly diminished, oversight of student loans could plummet, leaving fewer consumer protections and more power for lenders and borrowers, who are increasingly vulnerable.
“Secretary McMahon and the administration appear dedicated to dismantling federal protections and driving student borrowers into the private loan market,” Kyle Southern, Associate Vice President of Higher Education Quality at The Institute for College Access & Success, told me in an e-mailed statement. “The CFPB should play a critical role in protecting borrowers, and the bureau’s complaint system should be used to identify patterns and practices in loans across the market that could harm consumers. Without that backstop of protection, borrowers will face steadily increased risks as they continue to take on debt to finance their pursuit of the degrees and credentials needed to succeed in the workforce,” he added. The CFPB did not reply to a request for comment.
Here are some of the student loan oversight areas of the CFPB that may be in jeopardy.
The CFPB’s Role In Student Loan Oversight
Supervision of Servicers: The CFPB supervises major student loan servicers and lenders to enforce consumer protection laws. Its examiners have uncovered a range of unlawful activities in student loan servicing, from private lenders misleading borrowers about losing federal benefits when refinancing to servicers failing to properly process programs like income-driven repayment, a news release from the agency stated. By identifying these abuses, the CFPB pressures loan companies to fix errors and treat borrowers fairly. CFPB oversight has “curbed predatory lenders and loan servicers” for millions of borrowers that might otherwise run unchecked, according to US News & World Report.
Complaint Resolution: The CFPB operates a complaint system that gives borrowers a voice. If you have an issue – say your servicer isn’t crediting payments correctly or a private lender is harassing you – you can file a complaint on the CFPB’s public database. This often prompts a company response and sometimes a resolution. Importantly, the bureau analyzes complaints for patterns, helping spot widespread problems.
The CFPB’s Student Loan Ombudsman reported receiving a record number of student loan complaints over the past year – more than any prior period since the bureau started tracking in 2012. These 18,000+ complaints revealed systemic errors like botched payment processing and misinformation about repayment plans. Without the CFPB’s complaint system, many of these issues might go unnoticed – or unresolved – as borrowers would have no independent agency scrutinizing servicers’ responses.
Enforcement and Borrower Relief: The CFPB doesn’t just collect complaints; it also takes action. The bureau can investigate and sue companies that violate the law, often resulting in fines and restitution for borrowers. Under its watch, student loan enforcement had ramped up. In 2024 alone, the CFPB brought five enforcement cases against student loan servicers and providers, according to Goodwin Law: Regulators recovered about $126 million for borrowers that year (up from just $8.6 million the year before). Over the CFPB’s lifetime, it has delivered more than $5 billion in relief to student loan borrowers through enforcement and settlements, the Student Borrower Protection Center notes.
Real World Student Loan Borrower Protections
The CFPB’s interventions have translated into concrete student relief and protections. These include:
- Shutting Down Servicer Abuses: According to the Student Borrower Protection Center, after finding that Navient, once the nation’s largest student loan servicer, “failed borrowers at every stage of repayment” by steering them into costly delays and mistakes, the CFPB and state attorneys general took action. Navient was permanently banned from federal loan servicing and had to pay a $20 million fine plus $100 million in refunds to harmed borrowers. This enforcement sent a message that servicers will face consequences for mistreating borrowers.
- Holding Predatory Schools Accountable: The CFPB cracked down on for-profit college chains like Corinthian Colleges and ITT Tech for pushing students into high-cost private loans and then targeting them with aggressive collections. The bureau’s enforcement cases against these institutions secured over $1 billion in debt relief for tens of thousands of students who the institutions misled. The evidence CFPB uncovered helped the Education Department and state officials cancel an additional $4.5 billion for those borrowers. In short, the CFPB action provided a pathway to relief for students defrauded by unscrupulous schools.
- Reining in Private Lenders and Collectors: The CFPB has ordered big banks and private lenders to return money to borrowers for illegal practices. For instance, it forced certain banks to pay over $30 million in redress to student loan borrowers and tens of millions in penalties for violating consumer finance laws. It also worked with states to shut down sham debt relief companies that charged illegal fees to desperate borrowers. These actions protect borrowers from scams and keep lenders on notice.
What Student Loan Borrowers Stand To Lose If The CFPB Vanishes
If the CFPB is eliminated or hobbled, student loan borrowers would lose a crucial safeguard. Here’s what could change:
- Little to No Oversight: Today, the CFPB is a cop on the beat for student loans, alongside (and often more aggressive than) the Department of Education. Without the CFPB keeping servicers honest, oversight gaps could grow. Servicing errors and abuses could proliferate with far less fear of penalties. As the Student Borrower Protection Center noted, “without the CFPB, financial predators will get free rein.” Companies that might think twice under the CFPB’s eye could revert to destructive behaviors, from misapplying payments to pushing unfair loan products, without an independent regulator consistently auditing and penalizing them.
- Loss of the Complaint Hotline: Borrowers could also lose the CFPB’s popular complaint system. Right now, you can submit a grievance and expect it to be logged, investigated, and even used to spotlight industry-wide problems. If the CFPB disappears or diminishes, that feedback loop shuts down. Borrowers could be left to rely on loan servicers’ internal call centers or to complain to understaffed federal offices with far less transparency. The bureau’s complaint database has been an early-warning system for borrower issues; without it, regulators and lawmakers might not learn about emerging problems until borrowers have already been harmed.
- Potentially Weaker Enforcement and Restitution: No other agency has the same mission or authority to protect consumers across the financial industry. If the CFPB’s enforcement powers are stripped, who will pursue lenders or collectors that break the law in student lending? The Education Department’s oversight is primarily limited to federal loan program rules, and it historically focuses more on schools and financial aid administration than on punishing servicers. It is unclear if and how this oversight might change if Trump follows through on his executive order to move the federal student loan program to the Small Business Administration. State attorneys general can step into some extent, but they may lack resources and consistency nationwide. Borrowers could lose the backstop that has returned billions in wrongful charges and canceled fraudulent debts. Predatory actors might feel emboldened, knowing the biggest cop, with the biggest stick, is off the beat.
Riskier Borrowing Environment: A weakened CFPB could also mean a riskier student loan market. Private student loans often have higher costs and fewer protections and would face less scrutiny. Borrowers might see looser lending standards, more aggressive marketing of risky loans, and fewer consequences for lenders that mislead customers. For federal loan borrowers, servicers might not implement new relief programs or error corrections as diligently if there’s no watchdog to answer to.
The Upshot For Student Loan Borrowers If The CFPB Is Dismantled
The warning from TICAS’ Southern underscores what’s at stake for student loan borrowers. The current administration’s push to roll back federal oversight, from proposals to move student loans out of the Education Department to sidelining the CFPB, could leave tens of millions of borrowers with nowhere to turn when things go wrong. The CFPB’s “backstop of protection,” as Southern calls it, has been crucial in an era of growing student debt, helping ensure loan servicers and lenders treat consumers fairly. If that backstop disappears, student loan borrowers will be on their own against influential financial players.
The CFPB’s presence has likely meant stricter oversight of loan servicers, a responsive consumer complaint system, and tangible relief when borrowers are mistreated. Eliminating or weakening the CFPB has the potential to strip away many of these protections, creating an oversight void that private lenders and loan servicers might exploit. The CFPB’s fate isn’t an abstract political issue for student loan borrowers; it could directly impact their rights, wallets, and financial futures.