Student borrowers will be gaining new federal protections in March with the beginning of Consumer Financial Protection Bureau oversight of the nation’s largest non-bank college loan servicers.

CFPB supervision has the potential for making it easier for troubled student borrowers to modify loans when they are hit by unemployment or other financial hardship.

In addition, placing the servicers under CFPB rules to insure accuracy of reports to consumer reporting agencies could aid these borrowers’ access to credit in the future.

Sallie Mae, AES/PHEAA, Great Lakes, Nelnet Loan Servicing, EdFinancial Services, MoHELA and the Access Group are expected to be the servicers covered. They account for over 70 percent of the nonbank student loan servicing.

Come March, they will be under CFPB oversight for compliance to the Fair Credit Reporting Act, the Electronic Fund Transfer Act, the Equal Credit Opportunity Act and federal prohibitions again unfair, deceptive or abusive acts.

An estimated 7 million Americans are in default on their student loans.

When paying off their students loans, servicers (often different from the lenders) usually are the borrower’s sole avenue for making payments and payment adjustments.

CFPB has collected complaints against student loan servicers for more than a year, and the biggest problems that have surfaced include servicers spreading out excess payments over all loans when borrowers want the extra sums used to help pay down their costliest, highest-interest loans first; partial payment snags; and errors when loans are transferred between servicers.

The regulation will give student borrowers CFPB protection through the entire cycle of their loans from the original applications through servicing and, in severe cases, debt collection.