A New Voice for Students

By William Sealy

If you are a student, the last thing that should be on your mind in the classroom is how you are going to make ends meet over an unexpected credit card fee or a looming loan payment.

As the cost of college continues to rise, you may be one of the increasing number of students turning to debt to pay for your education. Many are relying on loans from private lenders that often lack the clear terms, fixed rates, and flexible repayment options of federal student loans. According to the Project on Student Loan Debt, nearly 1.5 million students now graduate with student loan debt each year, leaving school owing an average of $24,000 – a debt increase of about 25 percent since 2004.

In addition, credit card debt among college students has expanded considerably in recent years, with 84 percent of undergraduates owning at least one card. A study by Sallie Mae revealed that the average student now has at least four credit cards and will graduate with $4,100 in credit card debt. Only 17 percent of students say they regularly pay off all cards each month. This means that most students may be adding hundreds – even thousands – of dollars to their credit costs. And, if your credit history is dinged right out of the gate from missed payments or high debt levels, it could mean higher prices for credit down the road.

Here at the Consumer Financial Protection Bureau (CFPB), we aim to be a new voice for students. We are creating an office for students to provide you with tools for you to make the best decisions about credit.

We are already moving in the right direction. The Dodd-Frank Act, which President Obama signed into law in 2010, paved the way for the CFPB to assist students by examining providers of private student loans. In the coming months, we look forward to hearing from you about your experiences with and concerns about paying for your education with private student loans – and about how we can best help you.

A study by Sallie Mae revealed that the average student now has at least four credit cards and will graduate with $4,100 in credit card debt.
Student consumers will also benefit from the CFPB’s enforcement of bans on arbitrary rate hikes on existing credit card balances and other harmful credit card practices.
Get involved right away by visiting our main National Consumer Protection Week page, or using the #NCPW hashtag on Twitter

Student consumers will also benefit from the CFPB’s enforcement of bans on arbitrary rate hikes on existing credit card balances and other harmful credit card practices. These consumer protections were part of a law signed by President Obama in 2009. The consumer bureau also will enforce that law’s special new protections for college students and young adults, including a requirement that card issuers and universities disclose agreements with respect to the marketing of credit cards to students.

Additionally, the CFPB aims to help make the costs and the risks of credit products clear up front. If the costs and risks are clear, some students may respond by financing less of their education, using different credit products to do so, or decreasing their use of credit cards to pay for personal expenses. Others may go the other way, taking on a student loan or using credit to help with monthly expenses, confident that they understand the terms of the deal and can manage their obligations responsibly. In any case, clear information about prices and risks will help all students better sort through possible credit options.

This week, we are pleased to focus on these and other issues as we join 26 Federal agencies and partner organizations observing National Consumer Protection Week. National Consumer Protection Week gives us a chance to celebrate this important work and to find new ways to empower student consumers across the country.

You can get involved right away by visiting our main National Consumer Protection Week page, or using the #NCPW hashtag on Twitter to talk about what you’re doing this week to become a more informed consumer.

William Sealy is a member of the CFPB outreach team.

AJ

Thanks for the post! I’m excited to see how this will both help and protect students in the future. I know graduating with debt is very challenging because it takes a serious chunk out of your paychecks every month at the beginning of your career. I can’t believe that only 17% of students pay off their credit cards in full each month. This probably speaks to the fact that the rising financial burden of higher education and the lack of responsibility for spending on personal purchases. Looking forward to more discussions on twitter. @AJ_DC
AJ

Thanks for the post! I’m excited to see how this will both help and protect students in the future. I know graduating with debt is very challenging because it takes a serious chunk out of your paychecks every month at the beginning of your career. I can’t believe that only 17% of students pay off their credit cards in full each month. This probably speaks to the fact that the rising financial burden of higher education and the lack of responsibility for spending on personal purchases. Looking forward to more discussions on twitter. @AJ_DC
Get A Job

In his post, Mr. Sealy states the following:

“Many are relying on loans from private lenders that often lack the clear terms, fixed rates, and flexible repayment options of federal student loans.”

I find the sentence troubling.

First, the “lack of clear terms”. The disclosures provided by student loans are already governed by the Truth in Lending Act. The Act prescribes precise formulas that are to be used to calculate the annual percentage rate, or APR, so that the cost of one credit product can be compared to another competing product. The Truth in Lending Act also describes the disclosure of the fees, costs and terms of student loans. It also mandates informing the borrower what the total cost of the debt will be over the life of the loan.

Do we really need another government agency prescribing additional regulations and requirements? Consumers simply need to take time reviewing products, APRs, and the terms and conditions. I believe it is the responsibility of the individual borrower to become educated on what it is they are agreeing to in a loan contract.

What will be next? Requiring a lender to verbally read every paragraph of every contract to an applicant?

Second, the sentence states, ” Many are relying on loans from private lenders that often lack ….. fixed rates, and flexible repayment options of federal student loans.

I don’t understand the comment on fixed rates and flexible repayment options. Is the author of the blog stating that student loans must be mandated to have fixed rates and flexible repayment options? (What is a flexible repayment option anyway?)

I can understand the desire for clear disclosures. But to mandate the features that must be included in the product – this is a very slippery slope that cannot afford to be approached.

Why take away choices from students and their parents? If the APR on a variable rate student loan is less than a fixed rate student loan, and I am willing to take the risk of rates changing, then why is it the government’s business if I make that choice? I don’t need someone in Washington D.C. telling me what is good for me. I’ll make that choice, thank you very much.

These bureaucrats believe they know more than consumers, believe they know what is best for consumers, and want to mandate a narrow range of choices that consumers can choose from. Not only is this wrong, but it will reduce competitiveness, eliminate creativity in development of newer and better financial products, and it will concentrate the power within the hands of fewer entities.

Please don’t take away our choices. Don’t tell me what is good for me. I want freedom and flexibility. I do not want financial product socialism as I fear is bring promoted by this agency. Just because a few persons decide not to take personal responsiblity for their choices, and to then blame someone else, please don’t reduce the rights of the majority who are responsible.
- Miguel Barraganjr
  
  Simple… If you are going to give some person a debt that they can’t discharge in Bankruptcy, you should in the very least give the debtor some protection in return.
  
  I am speaking of Private Student Loans here. They carry the same protections for the lender as what the Government gets. The difference is… if the economy is bad (right now) and the only few jobs available right now are minimum wage ( I work IT and I’m doing it at 10 an hour.. excess labor pool+limited jobs = low salaries) then the government allows me to pay $25 dollars a month as opposed to my normal $200.
  
  On the other hand a Private student loan carries no protection. They can demand full payment and you have no option but to pay or not to pay. Now if you don’t pay they will sue you. They will win and begin to garnish 25% of your wages for the rest of your life. You can do nothing about it but die or leave country.
  
  This issue comes down to fairness. A government loan is fair. If make little they ask for little. A private loan is not so kind. So if you are going to allow a Private Lender to loan out monies that cant be bankrupt you should in return force them to accept the potential that the student might not be able to pay the full monthly amount and after a period of time the remaining balance of the loan is forgiven.
  
  This solution overs protection to both sides not just the lender.
- Miguel Barraganjr
  
  Simple… If you are going to give some person a debt that they can’t discharge in Bankruptcy, you should in the very least give the debtor some protection in return.
  
  I am speaking of Private Student Loans here. They carry the same protections for the lender as what the Government gets. The difference is… if the economy is bad (right now) and the only few jobs available right now are minimum wage ( I work IT and I’m doing it at 10 an hour.. excess labor pool+limited jobs = low salaries) then the government allows me to pay $25 dollars a month as opposed to my normal $200.
  
  On the other hand a Private student loan carries no protection. They can demand full payment and you have no option but to pay or not to pay. Now if you don’t pay they will sue you. They will win and begin to garnish 25% of your wages for the rest of your life. You can do nothing about it but die or leave country.
  
  This issue comes down to fairness. A government loan is fair. If make little they ask for little. A private loan is not so kind. So if you are going to allow a Private Lender to loan out monies that cant be bankrupt you should in return force them to accept the potential that the student might not be able to pay the full monthly amount and after a period of time the remaining balance of the loan is forgiven.
  
  This solution overs protection to both sides not just the lender.
Get A Job

In his post, Mr. Sealy states the following:

“Many are relying on loans from private lenders that often lack the clear terms, fixed rates, and flexible repayment options of federal student loans.”

I find the sentence troubling.

First, the “lack of clear terms”. The disclosures provided by student loans are already governed by the Truth in Lending Act. The Act prescribes precise formulas that are to be used to calculate the annual percentage rate, or APR, so that the cost of one credit product can be compared to another competing product. The Truth in Lending Act also describes the disclosure of the fees, costs and terms of student loans. It also mandates informing the borrower what the total cost of the debt will be over the life of the loan.

Do we really need another government agency prescribing additional regulations and requirements? Consumers simply need to take time reviewing products, APRs, and the terms and conditions. I believe it is the responsibility of the individual borrower to become educated on what it is they are agreeing to in a loan contract.

What will be next? Requiring a lender to verbally read every paragraph of every contract to an applicant?

Second, the sentence states, ” Many are relying on loans from private lenders that often lack ….. fixed rates, and flexible repayment options of federal student loans.

I don’t understand the comment on fixed rates and flexible repayment options. Is the author of the blog stating that student loans must be mandated to have fixed rates and flexible repayment options? (What is a flexible repayment option anyway?)

I can understand the desire for clear disclosures. But to mandate the features that must be included in the product – this is a very slippery slope that cannot afford to be approached.

Why take away choices from students and their parents? If the APR on a variable rate student loan is less than a fixed rate student loan, and I am willing to take the risk of rates changing, then why is it the government’s business if I make that choice? I don’t need someone in Washington D.C. telling me what is good for me. I’ll make that choice, thank you very much.

These bureaucrats believe they know more than consumers, believe they know what is best for consumers, and want to mandate a narrow range of choices that consumers can choose from. Not only is this wrong, but it will reduce competitiveness, eliminate creativity in development of newer and better financial products, and it will concentrate the power within the hands of fewer entities.

Please don’t take away our choices. Don’t tell me what is good for me. I want freedom and flexibility. I do not want financial product socialism as I fear is bring promoted by this agency. Just because a few persons decide not to take personal responsiblity for their choices, and to then blame someone else, please don’t reduce the rights of the majority who are responsible.
http://www.alqudseyes.com/v2_category/%D8%B1%D9%8A%D8%A7%D8%B6%D8%A9%20%D9%88%D8%B3%D9%8A%D8%A7%D8%B1%D8%A7%D8%AA رياضة وسيارات

I think that one of the most important things the CFPB does is to make the costs and the risks of credit products clear up front. Our entire country suffers from people spending money they don’t have due to credit cards.
I disagree with the comment below by “get a job”, we can’t leave it for the people to decide, we as a nation have responsibility for it as the tax payers money bails the people at the end of the day…
http://www.alqudseyes.com/v2_category/%D8%B1%D9%8A%D8%A7%D8%B6%D8%A9%20%D9%88%D8%B3%D9%8A%D8%A7%D8%B1%D8%A7%D8%AA رياضة وسيارات

I think that one of the most important things the CFPB does is to make the costs and the risks of credit products clear up front. Our entire country suffers from people spending money they don’t have due to credit cards.
I disagree with the comment below by “get a job”, we can’t leave it for the people to decide, we as a nation have responsibility for it as the tax payers money bails the people at the end of the day…

The CFPB blog aims to facilitate conversations about our work. We want your comments to drive this conversation. Please be courteous, constructive, and on-topic. To help make the conversation productive, we encourage you to read our comment policy before posting. Comments on any post remain open for seven days from the date it was posted.