Consumer Bureau targets student loan abuses
by Joseph Williams, Politico
Attention, current and former college students: If you or your loved ones have borrowed — or tried to — to finance your education, Richard Cordray wants to hear from you.
The Consumer Financial Protection Bureau, which has held public hearings on payday loans and is rewriting the rules on bank overdraft fees, is now accepting complaints from students and their loved ones about the difficulties of obtaining and repaying college loans, according to a press release issued today.
As part of its mandate, the CFPB wants to help borrowers who have struggled to get a private student loan, have had problems eliminating the debt or had difficulties managing a school loan that has gone into default or into collection.
‘The ability to work hard and better yourself through education is part of what makes this country so great,’ said Cordray, the CFPB’s director. ‘But getting a higher education can mean taking on significant debt ‘ a big decision with a lot of consequences. The CFPB is now the one-stop federal agency where all private student loan borrowers can ask questions, get information, and file a complaint about this important market.’
According to the CFPB, student loans have surged past credit cards as the leading source of unsecured household debt. Millions of students turn to private loans to pay for college to cover the costs that scholarships and federal student loans don’t. Unlike federal student loans, however, private student loans typically don’t have the same borrower protections as federally-backed loans, such as military deferments or calibrated income-based repayment plans.
Prior to the Dodd-Frank Wall Street Reform and Consumer Protection Act, there was no federal supervisory program over non-banks that issued student loans, and they were subject only to a patchwork of rules and oversight. Under Dodd-Frank, the CFPB now has the authority to police the student loan market.
Among its reforms, the new law allows for a private student loan ombudsman to assist borrowers and review complaints. The ombudsman, Rohit Chopra, is also responsible for examining the complaints and developing recommendations to Congress and other federal government agencies.
Consumers can get help from the CFPB on student loans through the bureau’s website, telephone, mail, and fax and can file complaints about any kind of student loan. While the CFPB will alone manage the private student loan complaints, the CFPB will work closely with the Department of Education to route complaints that fall under their purview as the overseer of federal student loans. The agencies executed a memorandum of understanding to ensure close coordination.
Examples of federal loans include Direct loans, Stafford loans, Perkins loans, and PLUS loans.