Alert June 10, 2014

Senate Committees Hold Hearings on Student Loans

In the wake of recent focus on student loan debt, the Senate Committee on Banking, Housing and Urban Affairs held a hearing on the “Student Loan Servicing: the Borrower’s Experience.” The concern shown in some testimony at the hearing suggests that there may be a push to regulate the student loan industry. Several individuals were invited to speak including, a college financial aid director, a local teacher and the Student Veterans of America. Similar to the CFPB’s concern, many of the witnesses testified on the impact of student loan debt on borrowers. The witnesses proposed, among other things, having only two repayment options: standard and income-based, that servicers be required to give notice of servicing transfer similar to mortgage servicing transfers, and numerous proposals around SCRA-protections (e.g., requiring automation for determining active duty service and SCRA-protections and no loss of SCRA-protections in refinancings and consolidation).

At a competing hearing, the Senate Budget Committee held a hearing on the “Impact of Student Loan Debt on Borrowers and the Economy,” in which the Assistant Director at the CFPB testified. The Assistant Director raised similar concerns as those raised in the Senate Committee on Banking, Housing and Urban Affairs. In particular, the Assistant Director at the CFPB discussed the impact of student loan debt on small business and entrepreneurship and health care and education—noting that student loan debt could “skew labor market outcomes.” The Assistant Director also raised issues in student loan servicing and refinancings of student loans.