Wednesday, May 8, 2013
CFPB Report Highlights the Burden of Student Loan Debt & Options For Making Repayment More Affordable
Consumers Union Urges Policymakers to Enable Students to Refinance High Interest Loans and Negotiate Affordable Repayment Plans
WASHINGTON, D.C. – A new report by the Consumer Financial Protection Bureau details the staggering debt that burdens an increasing number of graduating college students. The report highlights how this debt burden is having a long term damaging “domino effect” on the economy by making it even more difficult for young adults to purchase their first home, start a small business, and save for retirement.
The report identifies a number of potential solutions supported by Consumers Union to help students manage their debt, including giving private student loan borrowers the ability to refinance their loans, negotiate better lower payments over time, and a “credit clean slate” for borrowers in default.
“The difficulties students face paying off high loan debt are all too familiar to millions of American families across the country,” said Suzanne Martindale, staff attorney for Consumers Union, the policy and advocacy arm of Consumer Reports. “Enabling students to refinance their loans and negotiate more favorable terms with lenders would provide much needed relief for struggling graduates and the economy.”
Earlier today, Senator Elizabeth Warren introduced legislation that would lower the interest rate on subsidized federal student loans for one year to .75 percent – the same rate that big banks are able to borrow money from the Federal Reserve Board. The current 3.4 percent rate on federal loans is set to go up to 6.8 percent on July 1 unless Congress acts to extend the existing rate.
“Senator Warren’s bill underscores the great disparity between the extremely low interest rate big banks pay to borrow money and the higher rates that students often pay,” said Pamela Banks, Policy Counsel for Consumers Union. “Congress needs to act to find a way to help struggling students manage skyrocketing loan debt.”
Consumers Union has urged regulators and Congress to adopt a number of student loan reforms. For more information, see Consumers Union’s Seven Principles for Fair Student Lending.