Alert May 14, 2013

CFPB Releases Report on Student Loan Affordability

In conjunction with its field hearing on student loans, the CFPB releasedreport analyzing public comments submitted in response to its request for information on its Initiative to Promote Student Loan Affordability (see March 5, 2013 Alert). The CFPB sought and received the public’s feedback on questions such as how student loan burdens may impact the broader economy, how distressed borrowers manage their student loan obligations, and what options currently exist for borrowers to lower their monthly payments on student loans. The report discussed three general themes of the comments received: (1) the potential impact of student debt burden, (2) recent interventions in the student loan market, and (3) developing affordable loan repayment options. For example, the CFPB received comments about the impact of high student debt on borrowers including limiting a borrower’s ability to take on new financial obligations. In particular, at the hearing, Director Richard Cordray noted the economic implications of student loan debt on homeownership, small business development and retirement savings. In addition, commenters suggested a number of options for policymakers to encourage affordable repayment options on private student loans. For example, commenters suggested restructuring private student loans to offer similar repayment options as those available for federal student loans, incentivizing a refinance market, and increasing loan forgiveness options for certain borrowers, such as members of the military and those employed in public service. The CFPB noted that the comments it received were consistent with and supplement concerns previously raised by the CFPB and other monitors of the financial system.