Last month the Consumer Financial Protection Bureau (CFPB) released a report predicting that one-in-three rehabilitated student loan borrowers may default again on their loans. The CFPB projects that those defaults will cost borrowers more than $125 million in interest charges over the next two years. The CFPB’s report blames flawed student loan programs and gaps in programs for the significant defaults.
The CFPB’s report estimates that nearly 44 million Americans owe more than $1.4 trillion on student loans. Further, the report estimates that more than 8 million student loan borrowers are in default for failing to make a payment on their loans for at least 12 months.
The report recommends student loan reforms that include a streamlined and simplified path for borrowers from default to more affordable payment plans and steps to ensure that borrowers and lenders work together to ensure borrowers’ long term repayment success.
The CFPB has repeatedly stated that it plans to focus efforts on reforming the student loan industry. It has even initiated a number of enforcement actions related to student loan services, debt relief programs, and debt collection (see, e.g., Wells Fargo action, Bridgepoint Education, Inc., and Student Loan Processing.US).