The Consumer Financial Protection Bureau was set Thursday to propose new disclosures for federal student loans that would require servicers to provide several repayment options for borrowers.
The agency is expected to release a prototype of its sample student loan disclosure called "Payback Playbook" that most borrowers would receive from their servicer. The sample shows a borrower's current repayment plan and two personalized repayment options, including allowing borrowers to set their monthly payment based on their income.
The CFPB is accepting feedback on the disclosures through June 12. The agency is also set to release a new guide to help military borrowers navigate student loan repayment options.
"This effort is really meant to ensure that consumers are able to pick the plan that best fits their needs and ensure that the information they're receiving from their student loan servicer is accurate," Seth Frotman, the CFPB's student loan ombudsman and assistant director for the Office for Students and Young Consumers, said on a conference call Wednesday with reporters.
The agency is working with the Department of Education, which plans to finalize the disclosures in the coming months. The goal is to ensure that borrowers receive several options from their servicer to help make payments more affordable.
"Millions of consumers needlessly fall behind on their student loan debt, despite their right under federal law to a payment they can afford," CFPB Director Richard Cordray said in a press release. "The Payback Playbook, which has grown out of our joint work with Illinois Attorney General Lisa Madigan and her colleagues, is designed to help ensure student loan servicers provide personalized information, tailored to the borrower's individual situation. This will help these borrowers take action, stay on track, and steer clear of financial distress."
The CFPB also is working to develop guidance for servicers, lenders and others to strengthen student loan credit reporting. The bureau is determining how best to report student loan data to ensure credit reporting is fair, consistent and accurately reflects repayment activity.
The Education Department will implement the student loan credit reporting effort in the months ahead.
There currently are no federal standards for student loan servicers. Frotman said one of the most problematic issues is a lack of consistency in student loan servicing.
"Borrowers who were repaying their student loans in the same way had different reporting to credit bureaus," Frotman said.
U.S. Secretary of Education John B. King Jr. said that borrowers are entitled to receive information about affordable repayment plans but that many are not aware of them.
"There are no common protocols for servicers, so we're trying to get servicers to compete on the grounds of customer service," King said.
The Education Department announced a framework of new student loan borrower rights and expectations. The framework will ensure that borrowers with loans owned by the Education Department are treated fairly and that the student loan repayment process sets borrowers up to succeed.
Roughly 43 million Americans have student loan debt, totaling an estimated $1.3 trillion, the CFPB said. One out of four student loan borrowers is in default or struggling to stay current despite the availability of income-driven repayment options.