The nation’s consumer protection watchdog laid out a new program last week to increase oversight of student loans – which were held by 45 percent of 2011 graduates, according to the most recent data available.
The Consumer Financial Protection Bureau will begin regulating non-bank companies overseeing student loan payments, in addition to more than 150 banks and credit unions already under its purview. But the University’s top financial aid officer said that in its current form, the proposal will not impact GW students.
The rule would affect borrowers with both private and federal loans, as government loans are often farmed out to private loan servicers who collect payments and give borrowers with account information.
“We will always be there to answer loan questions for current students and alumni, especially if the information from their lender does not sound right,” Associate Vice President for Financial Aid Dan Small said. He added that his office will keep an eye on the proposal.
Nearly 49 million student accounts would gain federal oversight, comprising nearly 70 percent of all non-bank student loans, according to the consumer protection office.
The policy will be under public review for two months before it’s ultimately implemented.
“With student loan debt crossing the trillion-dollar threshold, it’s important to keep an eye on this market to make sure that consumers are being protected,” the office’s student loan ombudsman Rohit Chopra said.
The agency pitched the proposal to address complaints from student borrowers confused about payments, dealing with uninformed servicing personnel and facing roundabout payment processes.
“The CFPB hopes to make progress to make sure that students know before they owe and clearly understand the obligations they are entering when signing up for student debt,” Chopra said. “We also are looking to ensure that borrowers who are repaying their loans are getting the service they deserve.”
Through the first week of April, the government’s consumer protection arm will also collect feedback to draft a proposal to help make payments more affordable for private student loan borrowers. But as bankruptcy laws don’t apply to student loans, the agency is limited in its ability to overhaul the student loan sector.
In coordination with the Department of Education, the consumer finance agency has proposed other initiatives to make students more aware of higher education costs and debt. Last summer, the two agencies collaborated on a shopping sheet to help students compare financial aid offers from various institutions.
While over 500 universities have signed on to the proposal, Small said the University is still mulling the benefits of the standardized document, despite a Student Association resolution urging GW to adopt the tool.