Washington, D.C. – As the Trump administration fails to address problems in the student loan servicing industry – and as student loan debt in default rose 14 percent in the past year – the Center for American Progress is lending its support to efforts by the Consumer Financial Protection Bureau, or CFPB, to step up.
CAP submitted a letter this week supporting the CFPB’s efforts to gain greater transparency through their new Student Loan Servicing Market Monitoring initiative. Currently, federal loans represent a sizable majority of the more than $1.2 trillion in outstanding student loan debt.
“Federal loans make up 80 percent of outstanding student debt, which is why the federal government needs greater transparency and information to help student loan borrowers get clear, consistent information to manage their debt. Instead of working to improve outcomes for student loan borrowers, the Trump administration is actively trying to undermine efforts to make things better. The CFPB can help fill this gap,” said Sara Garcia, Research Associate for the Postsecondary Education team at CAP.
The CFPB’s program would begin collecting information on federal and private student loan servicers with the goal of using those data to create better protections for consumers and borrowers. CAP’s letter highlights several key areas that the data would shed light on:
Gain greater transparency into private loan outcomes: Currently, there are $7.8 billion in private student loans with minimal to no information on how these private loan borrowers fare.
Understand barriers to income-driven repayment, or IDR, plan enrollment: Problems exist with paperwork around IDR enrollment or re-enrollment. The plan would require servicers to report a range of new information on everyone who submitted applications to enroll in IDR or to recertify their income.
Answer whether deferments and forbearance help or hurt borrowers: More information will make it possible to target reforms and recommendations that prevent borrowers from remaining in one of these nonpayment statuses for extended periods of time.
Improve server support for borrowers: This information can help develop requirements for how often servicers should contact borrowers in different circumstances, as well as what types of outreach may be most beneficial.
Click here to read about the details of the letter.
For more information or to speak to an expert, contact Devon Kearns at [email protected] or 202-641-6290a