Today the Consumer Financial Protection Bureau (CFPB) announced that it is launching a public inquiry into student loan servicing practices that can make paying back loans a stressful or harmful process for borrowers. The issues that the Bureau is seeking information on include: industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service.
“Student debt stress can make borrowers feel like they are walking a tightrope where any false move in paying back a loan can cause them to fall,” said CFPB Director Richard Cordray. “Today’s inquiry seeks information on the pain points in student loan servicing that make repayment a more difficult and stressful process.”
In making the announcement Cordray referenced the following student loan “facts:
- Over $1.2 trillion: The total volume of outstanding student loan debt
- More than 40 million: The number of borrowers with student loan debt
- $29,384: The average balance of a borrower graduating from college with a bachelor’s degree
- 10 million: The number of federal loan borrowers who had a servicing transfer between 2010 and 2013
- $110 billion: The total volume of student loan debt in default
- 8 million: The number of student loan borrowers in default
- $129 billion: The total amount of federal student loan debt in forbearance
- 4.3 million: The number of federal student loan borrowers in forbearance
The public inquiry will focus on the following:
- Industry practices that create repayment challenges
- Hurdles for distressed borrowers
- Economic incentives affecting the quality of service
- Application of consumer protections in other markets
- Availability of information about the student loan market
The complete Request for Information (RFI) is available at: http://files.consumerfinance.gov/f/201505_cfpb-rfi-student-loan-servicing.pdf
The 36 page RFI highlights the fact that the CFPB “is engaged in a joint effort with the Department of Education and the Department of Treasury to identify initiatives to strengthen student loan servicing.”
Part “A” of the RFI is a narrative/primer on the Student Loan Market and a general overview of the myriad problems experienced by consumers when repaying student debt.
Part “B” of the RFI lists the specific areas of inquiry and is divided into 3 sections.
1) General practices in the student loan servicing industry, including practices for borrowers in distress
2) Applicability of consumer protections from other consumer financial products such as credit cards and mortgages
3) Availability of data about student loan performance and borrower characteristics during repayment
Cordray will make the announcement the focal point of his prepared remarks at today’s Field Hearing on Student Loans held in Milwaukee, WI.
The deadline for submitting comments is July 13, 2015.
Finally, as part of today’s announcement the CFPB is also re-launching an enhanced version of its Repay Student Debt online tool to help borrowers figure out their options for affordable repayment.