How the CFPB is trying to keep the student loan debt bubble from bursting

On Thursday, the CFPB called for the public’s input on how private student loans could be more affordable and repayment options could be improved. 

As reported by the Huffington Post, outstanding student loan debt has ballooned to more than $1.1 trillion as of 2012. Private student loans make up about 15% of that debt. The federal government backs most of the student loan debt.  However, private student loans are more problematic. In a press release, the CFPB reported that private student loans generally have higher and variable interest rates and may not allow borrowers any flexibility to manage payments in times of hardship.

The CFPB is accepting comments on the repayment issue through its website until April 8th of this year and will make the responses available to the public shortly thereafter.If you have ideas, you may comment through the website here

The CFPB acknowledges that the private student loan market is a small piece of this puzzle. CFPB’s Student Loan Ombudsman, Rohit Chopra theorizes that unsustainable student loan debt is holding back a full economic recovery and is actually dragging the economy down. Sources show that young consumers are having to hold off on buying homes and cars after graduation. A study from the Fair Isaac Corp. (FICO) showed that from 2005 to 2011, average student loan debt grew 58%, from $17,233 to $27,253. The Atlantic reported that the rate of adults in their late twenties who own homes has slipped since 1980. A study from the Federal Reserve found that only 9% of 29-34 year olds took out a first mortgage from 2009 to 2011, Bloomberg Businessweek reported. Data from the Pew Research Center revealed 32% of households headed by adults younger than 35 were paying off auto loans in 2010, down from 44% in 2007. Data from Huffington Post.

Student loans are designed to provide opportunities to borrowers to improve their way of life but it can also be incredibly stifling in the same way. Students must be informed consumers when deciding to borrow. The CFPB and the Department of Education collaborated to make information easily attainable and understandable. If you are planning on pursuing a higher education, ask schools for the financial aid shopping sheet or similar data. Knowledge is power and student loan debt is not necessarily “good debt.” 

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