Heather Disses Private Student Loans All Official Like
Usually I try to use my goofiest Mr. Mackey voice when I'm dissing on private student loans, but when the Consumer Financial Protection Bureau invited comment to inform their private student loan policy agenda, I decided it was time to get serious.
Here's the text of what I submitted. All the comments will ultimately be posted on regulations.gov
Comment in Response to Request for Information Regarding Private Education Loans and Private Educational Lenders
Regarding Docket No.: CFPB-2011-0037
Thank you for requesting input regarding private education loans, specifically about the scope and use of private education loans, information and shopping for private education loans, institutional loans, and repayment. Please accept these comments in response to your Request for Information Regarding Private Education Loans and Private Educational Lenders, Docket No.: CFPB-2011-0037.
I graduated from Duke University School of Law cum laude owing $125,000 in student loans and facing 30-years’ worth of $1,200 monthly payments. I didn’t realize I couldn’t afford an expensive education until after I bought one. I have practiced public interest law for more than a dozen years. Seven years ago, Equal Justice Works hired me to assist in their efforts to reduce the financial barriers to practicing public interest law. Since then, I have dedicated my professional efforts to advancing public service loan forgiveness which allows recent graduates to dedicate their careers to the greater good. I work to establish and expand debt relief programs and to inform borrowers, schools, and employers about how to benefit from available debt relief programs. I have provided training for tens of thousands of students and professionals. I specialize in providing consumer friendly information for graduate and professional degree holders with high student debt burdens. I interact with these borrowers and the people who love them every day.
Information and Shopping for Private Education Loans
Young people are taught that an education will provide the foundation for meaningful and rewarding employment. This is often the case; however, it is also true that there are significant costs associated with pursuing education. Many students are not well informed about post-graduate salary expectations and do not have a thorough understanding of student loan repayment obligations. Prospective student loan borrowers typically do not receive in-depth financial counseling and many experience significant stress associated with indebtedness and repayment. My audiences are among the most educated Americans, a group one would expect to be as well positioned as any to understand complex financial instruments. Even so, the borrowers I work with are consistently flummoxed over their own student loans, regularly lacking an understanding of the critical differences between federal and private student loans. In fact, many recent graduates are not entirely sure whether they borrowed private student loans, federal student loans, or both. This is not because these borrowers are cavalier; rather, I believe the exaltation of the apparently infinite value of higher education combined with the complexity of the student loans system makes borrower unawareness predictable.
A few law schools are beginning to respond by launching initiatives to help students successfully manage student debt. For example, the Michigan State University College of Law has developed a plan to more effectively discuss debt with prospective and current students. The cornerstone of this plan is their Statement on Loan Indebtedness.
Scope and use of private education loans
In my experience, the graduate and professional borrowers I encounter choose private education loans when they believe that private loans offer better interest rates than federal student loans. While this can be true for some borrowers, those rates are often variable rates with no cap, and such rates are only available to a select few borrowers with excellent credit ratings. I hear from a lot of private student loan borrowers who wish they had more fully the considered the reasons federal student loans are safer than private loans, including the borrower benefits and flexible repayment options attendant to federal student loans.
Recommendations
I applaud the Consumer Financial Protection Bureau for seeking this input and I appreciate the opportunity to submit these comments. I request that the Bureau plan a robust research agenda aimed at gathering and analyzing data regarding private student loan borrowing and repayment. I ask that you quickly establish a Private Student Loan Ombudsman’s office. Also, I encourage the CFPB to support legislative efforts to restore fair bankruptcy treatment of private student loan debt. Finally, I urge the CFPB to pursue the policy recommendations of the National Consumer Law Center and the Institute for College Access and Success. Thank you for your commitment to protecting consumer rights.
Kind regards,
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Heather Jarvis
