Federal Agency Considers Proposals to Ease Burden on Private Student Loan Borrowers
May 09, 2013
On Wednesday, the Consumer Financial Protection Bureau (CFPB) issued a set of proposals to create more flexible repayment options for private student loan borrowers, report The Washington Post.
Although private student loans only account for $150 billion of the $1 trillion in outstanding student loan debt, they have come under increased scrutiny in recent years. Such loans generally carry higher interest rates and fewer protections and benefits than federal loans, such as an income-based repayment program with eventual loan forgiveness.
In February, the federal agency began soliciting comments on how to create more flexibility for borrowers with private student loans after many frustrated borrowers signaled that they were struggling to make ends meet with high monthly loan payments and few options to refinance or negotiate other repayment options.
The CFPB’s report analyzes input from nearly 30,000 borrowers, policy experts and lenders.
Many of those who responded to the bureau’s request for comments expressed concern about the potential “domino effect” that can result when monthly student loan payments deplete consumers’ savings, prevent other types of consumer spending, and influence how graduates make choices about their careers and living situations.
To ease the burden on borrowers, the report offers a number of policy solutions suggested by the public, including creating more options for borrowers to refinance their private student loans, more negotiable repayment plans, and a “credit clean slate,” in which borrowers can repair their credit scores by adhering to a negotiated payment plan.
Rohit Chopra, CFPB’s loan ombudsman, said in a conference call with reporters that most borrowers asserted they were not looking to get off the hook for their debt, but rather wanted “a payment plan that works.” Policy makers should look not only for a sustainable long-term solution, but also for options that can help borrowers who are struggling now, Chopra said.
Related Links:
The Consumer Financial Protection Bureau’s Student Loan Affordability Report
https://files.consumerfinance.gov/f/201305_cfpb_rfi-report_student-loans.pdf
The Washington Post
Michelle Cormier Mott
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