The Private Student Loan Problem…
As many of you know, Heather is not a big fan of private student loans, considering their lack of borrower protections and flexibility when it comes time for repayment. In an editorial published Wednesday in the New York Times, the authors note how inconsistent loan servicing on the part of private lenders and a general lack of clear information on repayment terms during loan origination put private student loan borrowers at far greater risk of falling behind in their payments or defaulting than those who take out federal student loans.
The authors call for the federal government to offer refinancing and debt relief opportunities for private student loan borrowers (the best debt relief programs, Income-Based Repayment and Public Service Loan Forgiveness are only available to student with federal student loans). The editorial also calls for the Consumer Finance Protection Bureau (CFPB) to establish national standards for loan servicers to provide clear disclosures of conditions, advance notice of any changes to the terms of private student loans, and prompt resolution of customer requests for information.
Heather could not agree more with the call for better and clearer disclosure information being made available to all student loan borrowers. She also agrees with other recommendations offered to Congress by the CFPB in the most comprehensive study ever on private student loans, released this past July, including:
- enhance the role of schools in the private student loan origination process
- examine the appropriateness of the bankruptcy discharge standard, and
- modernize the regulatory framework to ensure a competitive, level playing field where consumers fully understand their debt obligations and lenders have appropriate data to make underwriting decisions.
Finally, as Heather has said on many occasions, "Friends don't let friends take out private student loans!"
JDJ
