CFPB Expands Oversight of Institutional Student Loans
By Hugh T. Ferguson, NASFAA Senior Staff Reporter
The Consumer Financial Protection Bureau (CFPB) in a notice published on Thursday announced that it would begin examining the operations of colleges and universities that extend private loans directly to students.
CFPB specifically highlighted that it will review particular institutional practices like placing enrollment restrictions, withholding transcripts, improperly accelerating payments, failing to issue refunds, and maintaining improper lending relationships.
“Schools that offer students loans to attend their classes have a lot of power over their students’ education and financial future,” said CFPB Director Rohit Chopra. “It’s time to open up the books on institutional student lending to ensure all students with private student loans are not harmed by illegal practices.”
CFPB examiners highlighted their key concerns with certain institutional practices. When a school withholds academic transcripts from students who fall behind on payments, for example, it negatively impacts students who may need their transcripts in the job market, the bureau argued.
Though the expanded scope of oversight would apply to both nonprofit and for-profit schools, CFPB specifically noted in the announcement that it was particularly concerned with past abuses at institutions like the large for-profit chains Corinthian Colleges and ITT Technical Institute.
CFPB sued Corinthian in September 2014, saying in its complaint that Corinthian lured students into taking out private student loans to finance their education, misrepresented the school’s financial interest in those loans, and misled students about their job prospects. The bureau went on to say that Corinthian used illegal debt collection methods to force students to repay those loans while they were still in school. The lawsuit eventually resulted in Corinthian being required to make more than $530 million in restitution payments to the affected students who took out the private loans Corinthian backed.
The bureau filed a similar lawsuit against ITT in 2014, two years before the institution abruptly closed and filed for bankruptcy. That lawsuit resulted in a $60 million settlement.
Publication Date: 1/21/2022
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