The Consumer Financial Protection Bureau is advocating for more flexibility on private student loans, which have become a struggle for college graduates.
The CFPB hosted a public meeting at Miami Dade College on Wednesday. Director Richard Cordray addressed the audience of about 100 people, and discussed the problems faced by people trying to repay their private student loans, which can be as high as $250,000 for some medical school graduates.
“Many of these borrowers did everything right, worked hard and made years of monthly payments and … couldn’t find any refinancing options,” Cordray said.
Private student loans are more restrictive than those given by the government, and often do not come with refinancing options or any other help for borrowers.
Cordray proposed solutions to alleviate the debt situation, which he said could help both the lenders and loan holders. What is necessary, Cordray said, is relief for student loan borrowers, including the ability to refinance debt for market interest rates; more flexible repayment plans for those struggling with paying back loans; and a transparent process in which monthly payments are lowered to help people who cannot pay back at the current rate.
Corday said many graduates have been reluctant or unable to buy homes and start businesses, which could end up hurting the economy.
Jennifer Wang, policy and advocacy manager for Young Invincibles, told one story about a woman who lost her job and went her lender to ask for a lower payment option. Instead, she was told that her payments would increase as a result of her job loss.
Cordray said that another woman likened it to “trying to put out a forest fire with a garden hose.”
He likened the student debt situation to the housing crisis, saying that watching people struggle to pay back student loans looked like when people were struggling to pay back their mortgages and receiving no help from the banks.
“We cannot just sit by and watch this happen to people again,” Cordray said.