When the CFPB issued its report on student lending in July 2012, it led to multiple attacks from consumer advocates on the industry. But now it appears that the study was deeply flawed, and the CFPB now admits it.
Last week, the CFPB announced that it was amending its July 2012 report to Congress on student lending. Indeed, the CFPB now acknowledges that the way it analyzed certain data might produce incomplete (read: wrong) results regarding: (1) the proportion of private student loan borrowers who exhausted their Federal Stafford Loan options; and (2) the extent to which schools certified a borrower’s need for a private student loan.
After reanalyzing the data, the CFPB acknowledged the results that formed the basis of its original report were not accurate, but that it was not changing the findings or recommendations in the original report.
The CFPB’s amended report concedes that there was less “direct-to-consumer” (DTC) borrowing during 2005-2007 than it initially reported and suggested that lenders were also managing some risks to consumers appropriately. Despite this, the CFPB is not budging on its finding that there is a significant risk of consumer harm in DTC lending programs. The results from the CFPB’s reanalysis also confirm the level of school certification of borrower’s need for a private student loan is higher than originally report, but the CFPB is not changing its recommendation for mandatory school certification.
While we welcome the CFPB’s willingness to reanalyze its findings, its unwillingness to modify at all its recommendations and findings based on this new information is of concern to those who believe that these errors were what led to many of the conclusions.