If you're laboring a mountain of private student debt, the government wants your ideas on how it can help.
The Consumer Financial Protection Bureau (CFPB) is collecting information on the impact of private student debt at regulations.gov through midnight on April 8.
As the cost of higher education soars – it's grown more than 1000 percent since 1978, according to Bloomberg News – many Americans face heavy student loan debt. Borrowers are in default on some $8 billion worth of private student loans, and many more are behind on their payments, according to the Consumer Financial Protection Bureau (CFPB).
To make matters worse, the bureau points out, private loans often won’t restructure payment plans for low-income borrowers or those in default.
The CFPB was created by the Dodd-Frank Act to prevent the kinds of financial abuses that led to the 2008 mortgage meltdown. It’s looking at how the federal government can make it easier for private student loan borrowers to vanquish their debts.
Among the questions it’s asking are: what are typical debt-to-income ratios of borrowers in distress? How do they keep up with their payments? Do they pile up other debts in order to pay off their student loans? How does their debt affect their lifestyle and their credit rating? And how could the system be changed to help people pay off their loans?
Many of the 371 comments posted so far are vivid stories of people struggling with debt. Daniel French is trying to pay down his law school bills. “I took out these loans with the belief that my hard work and increased salary would be enough to pay them off. Unfortunately, I now believe that these loans will follow myself and my family to my grave,” he writes. “More and more we're living on credit cards to get by and I foresee bankruptcy in my future.”
Alisa Daubenspeck and her fiancée worry about the interest rate on his private student loans. “Right now the rates are low and we can handle the payments. But if the rates go up even a little bit, we fear we would not be able to keep up,” she writes. “This affects every calculation that we make for the future, including buying a house, getting married, and having children. Additionally, we won't be able to start saving significantly for retirement until we are in our late 40's (and that's if we don't have children to send to college, thus starting the whole debt cycle yet again). We would be much more secure if we could lock in an interest rate on those private loans that would allow us to plan for the future, knowing that we will be capable of making the payments.”
Carol Rubin offers several suggestions:
“1) Make student loan interest entirely tax deductible (similar to a mortgage). This would make a small difference to a lot of people.
2) Federal government to buy up private debt to allow troubled borrowers to make income based payments on all student debt.
3) Real loan forgiveness after 20 years of repayment. In 20 years, a lot of us will be in our 50s. If we are still eeking by, this is not a good sign for anyone.
4) Slashing interest rates on student debt. Give us a fighting chance to pay the principal. Or, better yet, an interest holiday. This would give those of us who are trying to make good a chance to improve our odds.”
Meanwhile, some commenters worry the government will reward people for failing to live up to their obligations. “I believe every one who receives a student loan, must pay it back,” writes Martha Medina. “I personally had student loans in the past, I had to set my priorities and instead of buying a new car or new clothes and shoes with a credit card, I struggled for a few years after graduating college, and repaying my student loan was one of my top priorities.”
How do you feel about private student loans? Should the government take action to help borrowers? Share your thoughts at regulations.gov – and copy them below for your fellow GIMBY readers to discuss!