Student Loan Crisis Needs Congressional Intervention: Consumer Protection Bureau
Not surprisingly, the repercussions of the nation’s student loan debt crisis continue to grow. A new consumer protection agency, in a report to Congress and U.S. Secretary of Education Arne Duncan, compared private loans to the subprime mortgages which contributed to the housing bubble and the disastrous fallout when it burst.
(For a first-rate overview of the newly created Consumer Financial Protection Bureau’s report, read Libby Nelson piece on Inside Higher Ed.)
In a call with reporters late last week, the bureau’s director Richard Cordray said that the findings revealed that “students were yet another group of consumers that were hurt by the boom and bust of the financial crisis … Too many student loan borrowers were given loans they could not afford and sometimes for more money than they needed. They are now overwhelmed by debt and regret the decisions they made.”
As Nelson points out, there was some good news in that the report found the worst of the lending practices had apparently tapered off after 2008 when new regulations went into effect. However, individuals who took out loans prior to then are still suffering, Cordray said. One recommendation of the bureau is to allow individuals to discharge their student loans in bankruptcy court, something that’s not currently allowed.
On a related front, to help students navigate the often complex process of obtaining federal financial aid for college, the Education Department is unveiling a new website: StudentAid.gov. One of the features is Student Loan Collection Assistant, a digital tool to help answer questions from individuals who have fallen behind on their payments.