Department of Education and CFPB Issue Joint Report on Student Loan Debt

As explained on the Consumer Financial Protection Bureau's website . . .

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the
Director of the Consumer Financial Protection Bureau and the Secretary of Education
to submit a Report on private student loans. This Report [issued on July 20, 2012] addresses the following topics, as set forth in the Act:

• The private lenders, their market and their products, as they have evolved and performed over time,
• The consumers of these products, their characteristics, and shopping, usage and repayment behaviors,
• Consumer protections, including recent changes and possible gaps,
• Fair lending compliance information currently available and its implications, and
• Statutory or legislative recommendations to improve consumer protections.

Read the entire report and this LA Times article on the report, which explains the report's critical findings on the private student-loan industry and notes:

With more people steeped in student loan debt and defaults rising, two federal agencies are urging Congress to rein in private lenders that have flooded the market with often risky loans. The growth in loans from banks and other private lenders are exacerbating problems that college graduates — and dropouts — already have in repaying their government loans. Private loans made up about 15% of the $1 trillion in student loans outstanding last year. During the subprime housing boom in the mid-2000s, private lenders loosened their standards amid high demand from investors for loans packaged into securities ... . The lax standards and aggressive marketing led some people to borrow more than necessary to pay for college, the [agencies'] report said. "Too many student loan borrowers are struggling to pay off private student loans that they did not understand and cannot afford," said Richard Cordray, director of the consumer bureau. "We must do our best to leave the next generation in a better place than we are today, rather than buried under a mountain of debt."

Reminder: Consumers generally may not discharge student loan debt in bankrupty, even when the loans are entirely private.

Comments

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The growth in loans from banks and other private lenders are exacerbating problems that college graduates.

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