Too often, college students take out private loans when federal ones have better terms. It’s a problem that can cost students more in the long run and one that the government wants to address.
The Consumer Financial Protection Bureau published a Notice and Request for Information on private loans to help it prepare a report to Congress on private student lending.
It is seeking information, including:
- Available information to shop for private student loans
- The role of schools in the marketplace
- Underwriting criteria
- Repayment terms and behavior
- Impact on choice of study and career choice
- Servicing and loan modification
- Financial education and default avoidance
Student-loan debt is mounting. Two-thirds of college seniors graduated with loans in 2010, and they carried an average of $25,250 in debt, according to the recent report, Student Debt and the Class of 2010. Private loans make up 22 percent of that debt.
In July, the Project on Student Debt came out with a report criticizing the growing use of private student loans and noting that the majority of borrowers didn’t exhaust their eligibility for safer, more affordable federal loans first. Private loans are typically uncapped and have variable interest rates. Lenders don’t offer the same protections as with federal loans, including unemployment deferments, income-based repayment, public-service loan forgiveness, and cancellation if the borrower dies, is severely disabled, or is defrauded by a school.
The bureau is gathering information from the public on this practice to help in its education and regulatory work. The comments will help the new bureau as it prepares a report by July 21 on private student lending as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Comments can be emailed to CFPB_StudentsFedReg@cfpb.gov or mailed to Office of the Executive Secretary, Consumer Financial Protection Bureau, 1500 Pennsylvania Ave., NW, (Attn: 1801 L Street), Washington, DC 20220.
A version of this news article first appeared in the College Bound blog.