The Consumer Financial Protection Bureau on Thursday unveiled new disclosures for federal student loans that would require servicers to offer borrowers several repayment choices.
The "Payback Playbook" would provide borrowers with personalized information about their repayment options. Borrowers would receive it from their loan servicer. A sample provided by the CFPB 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 agency is working with the Department of Education, which plans to finalize the disclosures in the next few 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. "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 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.
Approximately 43 million Americans owe student loan debt, with outstanding debt estimated at $1.3 trillion. Repayment plan options for federal loans have expanded in recent years but one out of four student loan borrowers are in default or trying to stay current on their loans.
There currently are no federal standards for student loan servicers. Seth Frotman, the CFPB's student loan ombudsman and assistant director for the Office for Students and Young Consumers, said one of the most problematic issues is a lack of consistency in student loan servicing.
"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,” he 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.
The CFPB also is working to develop guidance for servicers, lenders and others to strengthen student loan credit reporting. It is determining how best to report student loan data to ensure credit reporting is fair, consistent and accurately reflects repayment activity.