WASHINGTON (5/10/13)--Consumer Financial Protection Bureau Director Richard Cordray this week outlined a trio of potential policy and market-based solutions that he said would "help struggling borrowers with unmanageable private student loan debt."
The student debt solutions were unveiled during a Wednesday field hearing in Miami, Fla. The potential actions, which were developed through suggestions from outside commenters, include:
- Allowing student loan borrowers that have dutifully repaid their loan to refinance their remaining debt at lower interest rates;
- Lowering monthly repayments to match a negotiated debt-to-income ratio; and
- Cleaning the slate and creating a payment plan for borrowers that need a way to repair their credit and get out of default.
A comprehensive CFPB student debt report released during the hearing found that Americans hold approximately $1.1 trillion in outstanding student loan debt, and one-in-five U.S. households have at least one resident that has taken out a student loan. The average outstanding balance for student loan borrowers is $26,682, and one-in-eight student loan borrowers owes more than $50,000. Thirty percent of student loan borrowers are delinquent, and a total of 6.7 million are more than 90 days behind on their student loan payments, according to the bureau.
Student loan debt is impacting housing, small business ownership, retirement savings and rural communities, the CFPB report noted.
"Everyone who cares about the future of this country should be focused closely on the many problems posed by a growing student loan debt burden borne by some of our best young people," Cordray said.
Also this week, Sen. Elizabeth Warren (D-Mass.) introduced legislation that aims to address student loan issues. Her bill, the Bank on Students Loan Fairness Act, would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently .75%.
In a recent meeting with CFPB officials, the Credit Union National Association said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for April 23 News Now
story: CFPB Seeks CU Help For Student Loan Issues.)