6 Findings from the CFPB Report on Private Student Loans
Las Vegas residents with student loans may be interested in this. One of the Obama administration’s accomplishments was establishing the Consumer Financial Protection Bureau (CFPB), the Treasury Department’s agency that specializes in consumer debt. According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, one of the CFPB’s tasks was to provide Congress with a report on private student loans, which it did in July 2012. Because student loans are a significant portion of consumer debt, it’s important for those considering filing Las Vegas bankruptcy to know the CFPB’s findings.
(1) Private student loans swelled in the last decade and then shrank. In 2001 they accounted for $5 billion, went up to $20 billion in 2008, and in 2011 were back down to $6 billion. The CFPB attributes the growth to investor demand for asset-backed securities and lax underwriting standards.
(2) Lax underwriting standards, in this instance, means private lenders issued students loans without regard to the cost of their educations or even consulting with their schools much less obtaining their certification. The CFPB believes that many students borrowed significantly more than necessary for their educations.
(3) Starting in 2008, banks tightened their requirements by lending to students with higher credit scores, requiring more co-signers, and demanding certification from schools.
(4) Private loans were not used evenly by students at institutions. For instance, although 14 percent of all undergraduates used private student loans, 42 percent were attending for-profit universities. Four in ten do not even exhaust their federal student loan options.
(5) More than 850,000 private student loans are in default, accounting for $8 billion.
(6) In 2005, Congress extended the undue “hardship exception” to private student loans’ dischargeability believing that it would reduce interest rates and increase access to credit. Neither result came about due to the change in the law, so the CFPB cautiously recommends Congress “determine whether changes are needed to the treatment of private student loans in bankruptcy proceedings.”
It appears the government is paying attention to the plight of private student loan borrowers, and hopefully reform is on the way. For those who already have high student loan burdens and are having difficulty repaying them, speaking to an experienced Las Vegas bankruptcy lawyer can help. Chapter 7 bankruptcy can eliminate other consumer debts, freeing up income for student loans, and the “undue hardship” exception is not absolute. Your circumstances might be bad enough to make discharge possible.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-803-9251 to set up your free consultation.