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CFPB Aid to Student Borrowers May Be Limited

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The Consumer Financial Protection Bureau has shown interest in the student loan marketplace, noting its potential to cause systemic problems, and the agency wants to assist struggling student borrowers.

"The agency sought comments Thursday on how to assist student borrowers amid fears that the $1.1 trillion in outstanding student loan debt could prove to be the next financial crisis. Regulators and analysts have warned that many borrowers have minimal access to refinancing options," writes American Banker's Rachel Witkowski.

The CFPB may be limited in the assistance they can provide to student borrowers as 85% of the outstanding debt is in federal loans. The agency does not have supervisory authority to modify such loans.

"If we're just talking about private loans, that's not going to save the market," said Michael Tarkan, an analyst at Compass Point Research & Trading. "The majority of the default problems with this country and student debt is primarily on the federal side and after that; it would be the legacy loans" underwritten before 2009.

Agency officials say the plan could still have significant impact despite the fact the bureau can only target private student loans.

For the full piece see "Why CFPB's Plan to Help Students May Have Narrow Impact" (may require subscription).

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As Dodd-Frank's impact continues to be felt far beyond banks' compliance departments, American Banker is your eyes and ears. In addition to our award-winning coverage, we now also scour a range of resources to aggregate even more of the news you need on this vital topic.
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