Student-loan borrowers should be on the lookout for misleading repayment practices that could make them pay 'more than they should,' a federal watchdog says

• The CFPB warned student-loan borrowers that their servicers might engage in misleading behavior.
• In the past, the CFPB said servicers have kept borrowers paying more than required.
• It encouraged borrowers to submit complaints if they notice issues with their repayment.

Student-loan repayment is starting back up again, and a federal watchdog wants borrowers to keep an eye on potentially misleading behavior.

On Tuesday, the Consumer Financial Protection Bureau released a blog post outlining what protections and options borrowers have as payments resume. Last week, interest began accruing on federal borrowers' balances after an over three-year pause, and payments are becoming due in October. The transition back into repayment is bringing confusion and challenges to some borrowers.

The CFPB wrote in its blog that "restarting student loan payments is a serious shift in their financial circumstances, especially as many of those borrowers will be making payments for the first time since graduating." It said that borrowers risk falling behind on payments due to the extra monthly expense, and while there are options for borrowers to reduce or eliminate their payments, past behavior from student-loan companies has made doing so difficult.

"Unfortunately, the CFPB has found in the past that some student loan servicers have made it harder for borrowers to access lower payments and loan cancellation programs," the blog said. "Our complaint monitoring, enforcement and supervision efforts have uncovered red tape, errors, delays, and even illegal practices that left borrowers paying more than they should."

The CFPB noted that as payments start back up again, it will be "looking closely" at loan servicers' practices, and it encouraged borrowers to submit complaints to the CFPB to ensure all companies are following the follow.

The agency has long been looking into potentially misleading behavior that has put student-loan borrowers at risk. In March, for example, the CFPB found that some student-loan companies continued to collect on debt that was discharged via bankruptcy, forcing consumers to pay on debt they no longer owed. "The student loan servicing industry should ensure that their collection practices are compliant with the law," CFPB Director Rohit Chopra said at the time, requiring the companies to return the illegally collected payments.

The CFPB on Tuesday also recommended that borrowers look into lowering their payments through President Joe Biden's new SAVE income-driven repayment plan, and the agency also reminded borrowers of th 12-month "on-ramp period starting in October during which missed payments will not be reported to credit agencies. However, that on-ramp "should not be used by servicers to delay assisting borrowers with their loans," the CFPB said.

As Insider previously reported, the transition back into repayment will be a significant challenge for borrowers, the Education Department, and student-loan servicers. Carolyn Fast, a senior fellow at The Century Foundation who focuses on higher-education policy, told Insider that "there's a lot of confusion and questions that borrowers have about what their obligations and options are right now. Many are worried that it could be a perfect storm of bureaucratic obstacles for borrowers."

Still, the Education Department said it remains committed to ensuring borrowers are receiving the best information from their servicers on their options for repayment. In a Tuesday press release, the department said it has "been in direct touch with 43 million borrowers and will continue to coordinate with servicers and outside partners to provide additional high-quality communications with specific, actionable information directly to borrowers to make sure every borrower has the information they need to make the best repayment decision for themselves."