The CFPB has launched a deeper investigation into private student loans as part of its mandate to review borrower complaints on student loans and provide recommendations to Congress. On June 14, 2012, the CFPB published an additional request for comment in the Federal Register asking state agencies, colleges, consumer advocates, and lenders to submit information and data regarding recent private student loan complaints. The CFPB also sent a letter to state attorneys general and higher education officials requesting their participation in the request for comment by sharing complaint data and analysis on private student loans. The CFPB emphasized that the additional request for comment does not encompass individual borrower complaints or personally identifiable information regarding borrower complaints. Written comments must be received on or before August 13, 2012.
To help focus the comments, the CFPB provided two questions for responders to answer.
First, the CFPB has asked for responses regarding what complaints are submitted by borrowers of private student loans. This inquiry includes the following topics: (1) whether the complainant is the primary borrower, co-signer, school, or other party; (2) the topic(s) featured in complaints (e.g., credit reporting, debt collection, billing disputes); (3) the types of institutions of higher education that complainants attend; and, (4) generalized descriptions or summaries of individual private education loan borrower complaints that do not include personally identifiable information.
Second, the CFPB has asked for responses regarding what processes institutions have in place to respond to complaints from private education loan borrowers. This inquiry includes the following topics: (1) how institutions receive complaints from private student loan borrows; and, (2) how institutions respond to complaints from private student loan borrowers.
Overall, the CFPB believes that student loan reform is necessary because (1) students are entitled to be fully informed before taking on student loan debt and (2) the increasing loan debt has a direct effect on the U.S. economy. At a banking conference, Rohit Chopra, the CFPB Student Loan Ombudsman, cautioned that student loan debt could hamper the housing market recovery and have long-lasting effects on other bank products.
The CFPB, in conjunction with the Department of Education, is also in the process of finalizing a joint study on the private student loan market. In connection with the study, which must be completed by July 21, 2012, the CFPB previously solicited comments from student borrowers. Last week, the CFPB published online more than 2,000 of these consumer comments. Of the 2,000 comments, the CFPB noted that there are three common issues that emerged: (1) borrowers are relying upon school financial aid offices for information and guidance for which loans to choose, but students are receiving inaccurate and inadequate information; (2) borrowers are struggling to manage their private student loan debt; and, many express significant regret in pursuing a degree; and, (3) borrowers are experiencing difficulty navigating the repayment process including, lost payments, record-keeping issues, onerous debt collection practices, and limited flexibility to negotiate repayment plans. Many of the comments included student experiences with unresolved complaints, an inability to determine who owns or services their loan, inconsistent documents and disclosures, as well as confusing information from colleges about the advantages of federal versus private student loans.
The CFPB has been actively pursuing a number of other initiatives to assist borrowers of student loans, including:
- Releasing web tools like the Student Debt Repayment Assistant and the beta version of a financial aid comparison tool;
- Conducting an in-depth study of the private student loan marketplace, revealing that there is over $1 trillion in outstanding student loan debt; and
- Collaborating with the Department of Education to develop the draft “Know Before You Owe financial aid shopping sheet.”