The Consumer Financial Protection Bureau has kicked off a new initiative it hopes will provide alternative repayment and refinance options for borrowers struggling to repay private student loans.
The CFPB released a Notice and Request for Information in the Federal Register on Thursday and said it will use the information to develop recommendations for policymakers.
“Too many private student loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder,” said CFPB Director Richard Cordray. “We will be analyzing plans for policymakers to consider that might help avoid a repeat of the mortgage meltdown for today’s student loan borrowers.”
Through April 8, the CFPB will collect input on a variety of issues related to repayment affordability, including:
- How student loan burdens might impact the broader economy and hinder access to mortgage credit and automobile loans;
- How distressed borrowers manage their student loan obligations;
- What options currently exist for borrowers to lower their monthly payments on private student loans;
- Examples of successful alternate payment programs in other markets and which features could apply to this market; and
- The most effective mechanisms for communicating with distressed borrowers.
The bureau is encouraging financial institutions, colleges and universities, professional associations representing health professionals and educators, housing finance experts, students, and families to submit comments. Instructions regarding how comments can be submitted electronically are posted on the CFPB’s website.
The announcement follows an October 2012 report the CFPB Student Loan Ombudsman sent to the Secretary of the Treasury, the Secretary of Education, the CFPB director and Congress that said borrowers have trouble negotiating affordable repayment plans with private student lenders and servicers.
In July 2012, Cordray and Secretary of Education Arne Duncan submitted a report to Congress that revealed more than $8 billion in defaulted private student loan balances representing 850,000 distinct loans. Unlike distressed borrowers with federal student loans, private student loan borrowers generally do not have long-term forbearance, income-based repayment, or rehabilitation options if they default.
