On April 28, the Consumer Financial Protection Bureau (CFPB), U.S. Treasury and the Department of Education announced several new initiatives to assist borrowers with paying back their student loans and improve servicing practices. Chief among these initiatives is the CFPB’s newly unveiled Payback Playbook.
The Payback Playbook is a set of prototype disclosures that presents a new way for loan services to communicate repayment options with borrowers. The purpose is to provide borrowers with personalized information about their loan repayment options so that they can secure monthly payments they can afford.
“The Payback Playbook is just the latest action the bureau is taking to address the most urgent problems identified by consumers, student loan servicers, consumer advocates and borrowers themselves. We are working with our partners at [the Department of] Education and Treasury to understand these problems and develop needed reforms in student loan servicing,” CFPB Director Richard Cordray said, adding that the CFPB has made it a priority to stamp out illegal servicing practices.
There currently are more than 42 million borrowers with student loan debt and the outstanding student loan debt is estimated at $1.3 trillion, second behind mortgage debt. One out of four student loan borrowers are currently in default or struggling to stay current on their loans, despite the availability of income-driven repayment options for the vast majority of borrowers.
According to a September 2015 report from the Government Accountability Office (GAO), it was found that 70 percent of federal Direct Loan borrowers who are in default earned incomes that qualified them for income-based repayment (IBR) options.
“This tells us that millions of borrowers may be failing to receive critical information about repayment options or are encountering communication breakdowns when they try to enroll,” Cordray said.
The Payback Playbook will appear on borrowers’ monthly bill, in regular email communications from their student loan servicers or when they log into their student loan accounts and will provide borrowers with three personalized repayment options in plain language, tailored to their specific circumstances.
Through June 12, 2016, the CFPB is requesting public feedback these prototype disclosures. To provide feedback, click here. Cordray stated that feedback will inform the next edition of the Payback Playbook and offer valuable insight to the Department of Education, which plans to implement the disclosures in the months ahead. The Payback Playbook is available here.
The CFPB, Treasury and Department of Education also announced the release of a new series of student loan borrower rights and expectations, to provide a framework to ensure borrowers with loans owned by the Department of Education are treated fairly and that the student loan repayment process sets these borrowers up to succeed.
“The bureau continues to emphasize that no consistent, market-wide federal standards exist for conduct of student loan servicers. With this framework, the agencies have taken another step toward improving the delivery of service for millions of student loan borrowers,” the CFPB stated.
Work also is being done to improve the credit reporting industry for developing guidance for servicers, lenders and others that furnish data to the credit reporting companies. The Department of Education will implement this effort in the months ahead.
Other tools announced include:
- The CFPB also released a new action guide to help military borrowers navigate their student loan repayment options and take advantage of special consumer protections designed to help men and women in uniform manage their debt while serving.
- Student loan borrowers can get more advice on student loan repayment options by using the CFPB’s Repay Student Debt tool. This interactive resource offers a step-by-step guide to navigate borrowers through their repayment options, especially when facing default.
- Student loan borrowers experiencing problems related to repaying student loans or debt collection can submit a complaint to the CFPB. More information is available here.
- The Department of Education is debuting its studentloans.gov/repay landing page, to better inform student loan borrowers about repayment options best-suited for their unique circumstances.