The Consumer Financial Protection Bureau announced Thursday that it is taking another dive into the student debt crisis. The agency will focus on refinancing options for private student loans, which represent roughly $150 billion, or one-eighth, of the overall $1 trillion education lending market.
In what the CFPB called a "first step" towards making policy recommendations to the Obama administration's Education and Treasury departments, as well as Congress, the consumer watchdog agency is soliciting input on what might make private student loan repayments more manageable and how to better assist distressed borrowers.
"If you think everything in this market is hunky-dory, you are completely missing the warning signs," CFPB Student Loan Ombudsman Rohit Chopra said in a call with reporters on Thursday. "Many of us have raised questions about the student debt domino effect on the economy."
The average student debt load grew 58 percent from 2005 to 2012, from $17,233 to $27,253, according to a recent analysis from Fair Isaac Corp. (FICO). A growing number of graduates are struggling to make their payments, and the percentage of loans more than 90 days past due continues to grow, according to FICO. Andrew Jennings, FICO chief analytics officer, recently declared the situation to be "simply unsustainable."
The CFPB believes the growing student debt burden is holding back a full economic recovery. Chopra reiterated that sentiment Thursday, and said the bureau is particularly concerned with the role student debt might play in preventing young adults from purchasing a home or car, dragging down the economy as a whole.
The rate of adults in their late twenties who own homes has slipped since 1980, The Atlantic reported. A study from the Federal Reserve found that from 2009 to 2011, only 9 percent of 29- to 34-year-olds took out their first mortgage, Bloomberg Businessweek reported. Fewer young adults are buying cars too: According to new data released from the Pew Research Center Thursday, 32 percent of households headed by an adult younger than 35 were paying off auto loans in 2010, down from 44 percent in 2007.
The burden of private student loans -- with rates often between 8 and 15 percent -- is "one piece of the broader student debt puzzle that must be solved," Chopra said.
"Many borrowers who have obtained employment and are making good money are not able to refinance and lock in a good rate," he added.
In previous reports, the CFPB has characterized private student lending as having an "uncanny resemblance" to the subprime housing market. The bureau also has suggested that Congress revisit a 2005 change in bankruptcy laws that makes it nearly impossible to discharge private student loans in bankruptcy.
"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," CFPB Director Richard Cordray said in a statement.
However, the options the federal government might pursue are more limited than the ones available for students with federal loans, where income-based repayment plans and options for debt forgiveness have already been instituted.
Chopra said solutions for private loan programs might include offerings available to those taking on other kinds of debt, like temporary offers of interest rate reductions or interest-only payments. Those ideas may or may not be applicable in this market, Chopra said.
A call by the CFPB in 2012 for public input on problems with private student loans resulted in more than 2,000 comments, which were released in June. The CFPB will be accepting comments about refinancing private student debt until April 8, 2013.
What problems have you experienced with your student loan debt? Share your story with HuffPost and add it to the slideshow below:
Brittany Baker, Allegheny College/Sarah Lawrence College
I'm all for paying high prices for good value -- and my education was certainly of quality -- but I'm not in the market to be abused. From interest rates to the ease of borrowing, to confusion of terms and steadily climbing price of college tuition, I guess I have to thank all of the higher education system while I have the floor to speak. To the loan companies, the banks and private colleges: thank you. I and my peers will forever be indebted to you. <a href="http://www.huffingtonpost.com/brittany-baker/debt-up-to-my-neck_b_945267.html" target="_hplink">Read more...</a>
Quinn Anderson, Boise State
As an average, working-class, white American male who is neither left-handed nor a great athlete, the options for scholarships available to me have always been slim. Combine that with my parents' income -- which is above Pell Grant eligibility and too high to be considered for greater loan amounts -- and you get my situation. At the end of the spring 2012 semester I will be $50,000 plus in debt, which means I will have reached my loan cap for borrowing. With a credit rating that sunk to an embarrassing low years ago, there is no way for me to borrow using private loans to finance my education. <a href="http://www.huffingtonpost.com/quinn-anderson/quinn-anderson-27-boise-s_b_943879.html" target="_hplink">Read more...</a>
Laquinda Settles, New York Institute of Technology
I graduated from the New York Institute of Technology in May 2010 with a degree in Communication Arts; I am currently working 2 part-time jobs with no benefits and making $12 an hour. I'm also so over my head in debt with college loans. It's to the point that I'm considering filing for bankruptcy. I went to college to educate myself and make more money, but it feels like I dug my own grave. College is one of the biggest scams in the world; some of these institutions charge students between $700-$800 per credit for an undergrad degree. <a href="http://www.huffingtonpost.com/laquinda-settles/a-degree-in-hand-but-what_b_951098.html" target="_hplink">Read more...</a>
Aleesha Nash, New York University
I am a 31-year old woman originally from Ohio working and living in New York City area. I graduated with a Master's degree in Speech and Interpersonal Communications from New York University's Steinhardt School of Culture, Education, and Human Development in 2007. Logging into the Federal Student Aid website I see that today my balance is $104,104.63 for a percentage of the information in my head. <a href="http://www.huffingtonpost.com/aleesha-nash/debt-thats-worth-it_b_945223.html" target="_hplink">Read more...</a>
Jaclyn Cabral, Elon University
I am a recent graduate from Elon University, a private school in North Carolina, and have $90,808 of college debt. Though my debt seems extremely high, Elon is also regarded as one of the most affordable private college educations.
My story dates back to high school where my parents worked opposing shifts simply to make ends meet. I knew since middle school that I would go to a great college and venture away from my hometown. My motivation during the past 17 years of my educational career was to do well, go to a great college and then have no problem landing my dream job. <a href="http://www.huffingtonpost.com/jaclyn-cabral/post_2357_b_945238.html" target="_hplink">Read more...</a>
Mike Newman, Ohio State University
I graduated from the Ohio State University with a fine arts degree in 2004. This is what I settled on after changing my major four times in my first three years at school. Clearly college wasn't for me, but I finished it because I wanted to make my parents proud and thought it would improve my life. Neither of my parents went to college, but they managed a pretty good life for themselves. Like all loving parents they wanted me to have a better life than them and were duped into believing that college was the answer. From the first day in elementary school to my last day in high school, we believed the myth that college was the only real path to success. <a href="http://www.huffingtonpost.com/mike-newman/forced-to-fall-off-the-gr_b_945263.html" target="_hplink">Read more...</a>
Brandon Woods, Hampton University
I turned down a full ride at Michigan State (a school that ranks in the top 20 in my field, education) to get the HBCU (Historically Black College and University) experience at Hampton University. It was the best thing I could have done as far as experiences go, but the worst for my finances. They say you can't put a price on experience, but I can. Roughly $24,000 my freshman year, and it only got more expensive every year after that. <a href="http://www.huffingtonpost.com/brandon-woods/i-should-have-listened-to_b_951080.html" target="_hplink">Read more...</a>
Erin Dunphy, Ithaca College
I grew up with an insatiable need to explore the world around me. So I knew when I was going to go to college I was going to do two things: One, major in journalism and two, leave my home. It was time for me to blaze my own path.
I had worked hard throughout high school and did all those things they tell you to do to get as much money out of the process as possible. I was an honors graduate and was involved in almost every kind of extracurricular activity. I did my best to be the girl any college would want -- and therefore would hopefully give money that she wouldn't have to pay back. <a href="http://www.huffingtonpost.com/erin-dunphy/excited-for-the-future-ev_b_945253.html" target="_hplink">Read more....</a>
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Source: http://www.huffingtonpost.com/2013/02/21/cfpb-private-student-loans_n_2734065.html?utm_hp_ref=college&ir=College
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