Some Education Loan Servicers are Still Collecting, Even Though Debt Is Discharged From Bankruptcy, CFPB Says

Mark Hake

The Consumer Financial Protection Bureau (CFPB), a federal agency, says some education loan servicers are committing fraud. They are still collecting student debt payments from borrowers, even though the debtors' loans were discharged through bankruptcy.

This was announced on Thursday, March 16, by the CFPB, "CFPB Heightens Scrutiny of Unlawful Collection of Payments on Discharged Student Loans."

Their examiners have found evidence that certain loan servicers were illegally returning loans to collections after bankruptcy courts had discharged the loans. The actual Bulletin about this published by the CFPB in the Federal Register nor the related press release did not name the actual loan servicers.
Student Borrower Protection CenterPhoto

Yahoo! Finance reported that student advocate groups "cheered" the attention of the CFPB on this issue. The reason is many students assume they cannot discharge their debt in bankruptcy, but that is not completely true. In addition, The Student Borrower Protection Center helps students get these types of debts discharged.

The Yahoo! Finance article lists the types of private student loans that can be discharged in bankruptcy. In addition, the article says the Center says that 2.6 million borrowers were qualified in 2022 for a discharge in bankruptcy “despite representations to the contrary by lenders and loan servicers.”

The CFPB is now examining student loan servicers and decided to issue this warning to them to stop this practice, as well as to inform borrowers about this abuse.

The problem is student borrowers have to be very clear about whether their student loans can really be discharged in federal bankruptcy. Certain types of student debt are not eligible.

That is why if you are considering discharging your student debt you should research the issue carefully.

Moreover, if your debt has been discharged by a Federal judge and you are still getting charged by a student loan collection service, you should contact the CFPB to register a complaint. Consumers having an issue with a consumer financial product or service can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).


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Mark R. Hake, CFA, writes articles on national and local news, stocks, and market events at,,, and as well as TalkMarkets.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ

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