CFPB Launches Tool to Improve Student Loan Borrower-Servicer Communication
By Allie Bidwell, Communications Staff
The Consumer Financial Protection Bureau (CFPB) last week released a set of prototype disclosures in the hopes that a more personalized touch will help student loan borrowers find the right repayment plan and avoid default.
Dubbed the “Payback Playbook,” the guide is intended to break down communication barriers between borrowers and their loan servicers, and clearly outline repayment plan options that best fit each borrower’s needs. The Payback Playbook would be distributed to borrowers through their monthly bills, in email communications from their loan servicers, or when they log into their student loan accounts, the CFPB said in a release. The increased and personalized communication is an effort to overcome to apparent disconnect between struggling borrowers and the student loan default epidemic.
A report from the Government Accountability Office published in September found that 70 percent of borrowers in default would qualify for an income-driven repayment plan, suggesting borrowers may not be receiving critical information about student loan repayment from their loan servicers.
CFPB Director Richard Cordray noted in a call with reporters that the disclosures would also put into practice the statement of principles for loan servicing that the CFPB developed and published with the Department of Education (ED) and the Department of the Treasury last fall. Consumers are invited to share their feedback on the draft in order to improve the next edition the CFPB publishes.
“Students who borrow tens of thousands of dollars to finance their education must be able to trust their loan servicers to provide them with essential information,” Cordray told reporters.
The Payback Playbook would present individual borrowers with three repayment plans best suited to their current status. Borrowers who have missed payments or are at risk of defaulting would be given a single option with instructions on how to lower their monthly payment. The disclosure would also be presented with up-to-date information when circumstances change, such has how much longer a borrower would need to make payments until the loan is paid off or forgiven.
“In our national conversation about higher education policy, we must be mindful of the very real challenges facing those who have already accrued substantial amounts of student loan debt,” Cordray said. “Millions of Americans are burdened by this debt. We cannot leave them in the dark about their repayment options or set them adrift without strong consumer protections. They deserve a well-functioning student loan servicing marketplace. Learning is hard enough on its own without living in fear of future financial hardship.”
Publication Date: 5/3/2016
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