Student loan borrowers need enforcement and repayment flexibility

00_CharleneCrowell01Earlier this year, the Consumer Financial Protection Bureau (CFPB) asked for public comments on private student loan debt affordability.

By the April 8 deadline, more than 4,300 organizations and consumers answered. The volume of these requests suggests that the more than $1 trillion of debt already incurred by student loans is on the minds of many Americans. Clearly, consumers want repayments to be manageable, but there are also concerns for fairness and enforcement.

As a nonpartisan organization dedicated to protecting family wealth and working to eliminate abusive financial practices, the Center for Responsible Lending (CRL) had strong advice to offer CFPB.

Predatory loaners
According to CRL, “First, no student loan modification or refinancing program should take the place of enforcement actions against predatory private student lenders. Some lenders have engaged in a variety of unfair, deceptive and abusive practices, trading on students’ hopes to better themselves through education.”

In its call for strong oversight and enforcement action against private student lenders, CRL noted that Sallie Mae recently issued private student-loan backed securities. This publicly-traded corporation originates services and collects on student loans.

Currently, it manages accounts for more than 10 million borrowers and $180 billion in related debt. CRL reminded CFPB that mortgage-backed securities, the secondary market’s purchase and bundling of sub-prime loans, was a major contributor to the housing crisis and the lingering Great Recession.

“This demand could drive increased originations of student loans and degrade underwriting standards, similar to mortgages in the early-and mid-2000s. The Bureau should stay vigilant as the private student loan market grows,” added CRL.

Poor targeted
For communities of color, the specter of a second major financial dilemma does not bode well. With a trillion-dollar loss of wealth stemming from foreclosures, and unemployment double that of the rest of the nation, consumers of color in many cases turn to student loans to finance much of college education costs.

In many instances, students are encouraged to take out a higher-cost private loan even when they have not fully utilized their eligibility for cheaper federal student loans. In other instances, for-profit schools target low-income and minority students and steer them toward the higher-cost private loans.

In a March address before the National Newspaper Publishers Association (NNPA), Arne Duncan, U.S. Secretary of Education, noted that Black college enrollment has grown by 15 percent from the fall of 2008 to the fall of 2011.

It would be an agonizing loss if these young peoples’ pursuit of higher education only brings a lifetime of debt.

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at:



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