The Consumer Financial Protection Bureau ("CFPB")
responding to the growing amount of student loan debt, has
initiated a request for information "to determine options that
would increase the availability of affordable payment plans for
borrowers with existing private student loans" on February 27,
2013. Comments must be received on or before April 8,
Among other things, the notice and request for information from the
public published in the Federal Register, continues the
process of the CFPB's exploration of opportunities to spur
refinance and modification activity in the private student loan
market. Specifically, the request seeks information on
options to increase the level of affordable repayment options for
both pre-default and post-default borrowers in distress who wish to
repay their loans but may be lacking near-term ability to service
According to the CFPB, there are more than 38 million student loan
borrowers with over $1.1 trillion in outstanding debt.
Further, a recent report by the CFPB and Department of Education
submitted to Congress found that "as of the end of 2011, there
were more than $8 billion in defaulted private student loan
balances, with even more in delinquency."
Under the Consumer Financial Protection Act (Section 1035 of the
Dodd-Frank Act) the CFPB student loan ombudsman has the authority
to make "appropriate recommendations" to the Director of
the Bureau, the Secretary of the Treasury, the Secretary of
Education, and Congress.
The CFPB in the Notice recognizes that the "private student
loan market might ... benefit from further loan modification
activity" like in the residential mortgage loan market.
The Notice speculates that with concessions, creditors might
increase the net present value of distressed loans through such
modifications. The CFPB acknowledges, however, there are
differences among private student loans and mortgages that might
fundamentally impact creditors' economic calculus for
determining whether to offer a change in repayment terms.
Also, the CFPB states that there are a number of potential
impediments to offering alternative repayment options, including:
"(a) Accounting guidelines that add complexity when offering
alternative repayment options without charging off the loan; (b)
operational and information technology limitations among loan
servicers; and (c) incentive mismatch among trustees,
administrators, and/or noteholders in asset-backed securities
trusts and loan servicers."
The CFPB is interested in responses in the following general
categories: scope of hardship; current options for borrowers
with hardship; past and existing loan modification programs for
other types of debt; servicing infrastructure; consumer reporting
and credit scoring; lender participation; borrower awareness; and
impact on spillover markets (e.g., access to mortgage
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