The federal government’s Consumer Financial Protection Bureau (CFPB) recently announced it’s looking for suggestions on how to make debt repayments for private student loan borrowers more manageable. The CFPB is soliciting feedback from consumers with student loan debts who are teachers that “can’t afford to teach in their hometowns,” doctors that “feel forced to specialize” and others who can’t buy a home or enjoy a stable financial life because of their educational debt.
Because most students are so young when they begin accruing student loan debt (age 17 or 18), they likely have no idea of what they’re getting themselves into. Short of a home purchase, this is likely one of the largest sources of consumer debt most people will take on in their lives. Yet it’s one we also make when we’re less likely to make an informed decision.
And for those utilizing private student loans, the debt load (averaging almost $30,000) can be even more difficult to manage, leading to higher levels of default than federal loan borrowers. Of the $1 trillion in outstanding student loan debt, roughly $150 billion is made up of private student loans. Private loans are made by banks, credit unions, state and non-profit agencies, schools and other financial companies. Not all of these lenders are playing fair and the CFPB is looking for whistleblowers to help clean up the industry.
CFPB’s director Richard Cordray says, “Too many private student-loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder. We will be analyzing plans for policy makers to consider that might help avoid a repeat of the mortgage meltdown for today’s student-loan borrowers.”
It was less than a year ago, in March 2012, that CFPB first began accepting complaints about student loans. Between March and September, the CFPB received nearly 3,000 complaints about private educational debt. With the program not widely announced, this number of complaints is significant.
At the end of the first six months of data collection, the CFPB and Education Department told Congress that “too many student loan borrowers are struggling to pay off private student loans that they did not understand and cannot afford.” Based on the complaints received and a mission to improve what has become an epidemic of unmanageable student loan debt, CFPB is inviting consumers negatively impacted by private student loans to send information.
Here are the areas of concern the CFPB is seeking information about:
1. Scope of Borrower Hardship – What’s causing private student loan borrower distress? How do borrowers in distress stay current on student loans? To what extent do they reduce consumption or adjust living arrangements to meet their loan obligations?
2. Options for Borrowers with Hardship – What options are there to permanently or temporarily lower monthly loan payments? Have repayment options cured delinquency? Do lenders work with co-signers to modify terms (if so, how)?
3. Loan Modification Programs – What kinds of loan modification programs for other kinds of debt have been successful? Which of these programs could apply to a student loan affordability program? Which might not be appropriate?
4. Spillovers – How does student loan debt impact access to mortgage loans? How does student debt impact the ability to accumulate a down payment? How do student loans affect ability to secure an auto loan, consumption patterns, ability to save, owning a home, starting a family or your own business?
If you have a private student loan and it’s negatively impacting your life in way, you should consider responding to their request for information. The deadline is a little over a month away – all comments must be received by April 8, 2013. This is your chance to share your story to hopefully make a difference in the way private student loans are handled.
To participate, read the instructions for submitting comments and then submit comments electronically to email@example.com or via US mail to Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street, NW, Washington, DC 20552. All comments must include this identifier: Docket No. CFPB-2013-0004.
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