The Consumer Financial Protection Bureau is seeking suggestions on how to develop a policy plan to help borrowers of private student loans find more affordable repayment options.
The consumer watchdog is asking the public, including financial institutions, colleges and professional associations, to offer suggestions it will use to make recommendations to lawmakers. The agency itself has limited power to develop and enforce a new framework for private market student loan oversight, CFPB officials said. The CFPB is taking comments through its website through April 8, and will make the information public soon after that date.
According to the CFBP, student loan borrowing already has exceeded the $1 trillion mark, with more than $150 billion of it in private loans. The agency issued an October 2012 report that found there are more than $8 billion in defaulted student loan balances.
"Too many private student loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder," said CFPB Director Richard Cordray in a statement. "We will be analyzing plans for policymakers to consider that might help avoid a repeat of the mortgage meltdown for today's student loan borrowers."
Those who borrow from private lenders often find repayment even more challenging because they don't have the flexibility or negotiating power that the federal government can provide borrowers, such as income-based plans or extended repayment options. Also, tuition prices keep rising, while wages, when adjusted for inflation, keep dropping, the agency said.
Rohit Chopra, the student loan ombudsman at the CFPB, said massive debt from student loans impacts the greater economy and could affect borrowers' ability to access credit, or purchase homes or cars.
"Federal student loans remain the best option for borrowers, but we know some students have turned to private student loans and are struggling to repay," said U.S. Secretary of Education Arne Duncan in a prepared statement after the press briefing. "We're glad to see the CFPB is taking steps to help create options for those who are having trouble managing their private student loan debt."