Clear repayment options could help thousands of borrowers keep current on their loans and avoid default
About 43 million Americans owe student loan debt totaling a staggering $1.3 trillion. Many borrowers are eligible for some kind of repayment plan for their federal loans, but many seem unaware or confused by the process.
To make things easier and hopefully encourage more borrowers to seek out plans that would keep them current on their debt, the Consumer Financial Protection Bureau (CFPB) developed a set of prototype disclosures that outline several affordable repayment options.
Once finalized, the Payback Playbook would be available on their monthly bills, in regular email communications from their student loan servicers, or when they log into their student loan accounts. The prototypes are available for public comment until June 12.
A government audit found that 70 percent of federal loan borrowers in default earned incomes low enough to qualify for reduced monthly payments under an income-driving repayment plan. This is important given that one in four student loan borrowers are currently in default or scrambling to stay current on their loans.
Based on more than 30,000 public comments, servicing failures are part of the reason why borrowers end up defaulting. Consumers reported miscommunication from servicers that caused distress, increased costs, and prevented borrowers from obtaining affordable payments.
The Payback Playbook would require servicers to provide personalized information tailored to borrowers' specific circumstances that show what their payments would be under different repayment plants.
For borrowers who have missed a payment or at risk of defaulted will receive a Playbooks that provides a single option with personalized instructions written in plain language describing how to lower their monthly payment.
To view and comment on the prototypes, click here.