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Ed. note: This is cross posted from the Consumer Financial Protection Bureau Blog
Today, we announced that we’re gathering information to come up with a plan to address the challenges many struggling borrowers face to find a more affordable payment plan on their private student loans. We need your ideas and help to stem the tide of trouble for many student loan borrowers.
Student loans are a critical part of the consumer finance marketplace — a way for millions of Americans to attend college and climb the economic ladder. But rising balances and distress in the student loan market raise questions about the domino effect on the rest of the economy and society. Will young consumers with large amounts of student loan debt be able to start small businesses and buy homes like generations before them?
Policy makers and financial institutions have taken steps to ensure that lending is safer. Many loans of all types made in years leading up to the financial crisis would likely not be made today. But those already stuck with heavy debt burdens and looking for some way to pay it back, want to know: what about us?
Most of the student loan market consists of federal student loans, which allow most borrowers to avoid default through the income-based repayment options in times of hardship. But private student loans – a market which boomed in the years leading up to the financial crisis – generally don’t.
Over the last year, we’ve heard from thousands of private student loan borrowers willing to make good on their debts but seeking a more affordable payment, especially when navigating tough times. One of the top complaints we’ve heard from private student loan borrowers was the inability to refinance or negotiate an alternative repayment plan with their lender or servicer.
This is a familiar story. Since the financial crisis, millions of homeowners have sought more affordable mortgage payments by refinancing and locking in rates at historically low levels. Others pursued loan modifications to avoid foreclosure with mixed success. But for many private student loan borrowers, finding a more affordable payment has been a frustrating experience.
We also hear from lenders, who want customers to be successful and ultimately repay their loans. That’s why we’re looking to put together some creative solutions to find private student loan repayment plans that borrowers can actually afford.
We need your input to help student loan borrowers experiencing distress and default. Learn more about this project and how you can contribute ideas. We want to hear from borrowers, lenders, schools, and everyone with a stake in the success of this market by April 8th.
In the coming months, we’ll release your input and our ideas on how to address this piece of the student debt puzzle. Stay tuned.
Rohit Chopra is the CFPB’s Student Loan Ombudsman.