In a speech delivered at Georgia Tech yesterday, President Obama discussed his plans to implement more robust consumer protection for student loan borrowers. Shortly before his address, the president signed a Memorandum directing the Department of Education and other federal agencies to help students better manage their loans.
Leslie Parrish, deputy director of research at the Center for Responsible Lending, remarked:
Faulty and inaccurate communications are all too common traits among the companies that now service more than $1 trillion of student debt. There is a lack of basic protections and information about repayment options and a record of poor treatment for those struggling to make monthly payments.
Yesterday's call for an overhaul of servicer practices and a review of contracts and contractors is welcome news. The Department of Education must look to improve communication with student loan servicers, require better information about loan repayment options and develop systems that will provide rapid and real relief for people struggling under the burden of student debt. We urge the Department to enact these changes as swiftly and comprehensively as possible.
The Consumer Financial Protection Bureau, with its vast expertise of financial markets and servicing, also has an important role. They can raise standards for servicing for all types of student loans and examine some of the misguided policies that are unique to this type of consumer debt.
This is also an opportunity to reconsider whether student loans should be more easily dischargeable during bankruptcy – and whether students who incur federal student loan debt while attending for-profits schools engaged in fraudulent practices should be granted relief.
For more information, contact Catherine An at 202-349-1878 or firstname.lastname@example.org.