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A federal partnership to increase financial capability for workers with disabilities

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We know that individuals with disabilities often face barriers and challenges in moving toward economic security and self-sufficiency. That’s why we’re committed to making sure that these individuals have the help and support they need to begin planning and saving for their financial goals. Over the past year, our team has traveled across the country; we’ve heard directly from consumers and the organizations that serve them about the importance of timely, relevant, and accessible financial information.

If individuals with disabilities are entering the workforce for the first time, they may never have had a savings or checking account, or may have no credit record. If they are going back to work after an injury or illness, their credit score may have suffered because their income was halted or reduced. Today, we’re proud to announce that CFPB and the Department of Labor have signed a memorandum of agreement that formalizes our joint commitment to help workers with disabilities increase their financial capability.

Consumers, regardless of their disability status, need to understand money management, savings, credit, and how to evaluate financial choices. Equally important, consumers need to know where to get assistance if they are treated unfairly or their rights are violated.

The new partnership between CFPB and the Office of Disability Employment Policy (ODEP) aims to help consumers with disabilities get the information and assistance they need. We are working together to develop and provide educational materials, resources, and technical assistance to the clients and professional staff of America’s Job Center’s (AJCs), operated by the Department of Labor. We’re promoting and sharing strategies that effectively help improve the financial capability of consumers with disabilities, and identifying policy-oriented reforms.

By working with and through ODEP’s national network of local and state government, employers, and disability constituencies nationwide, we will reach consumers with disabilities at crucial times, when they are entering employment training, seeking a job, or starting one. As our joint efforts expand, we hope to help many thousands of consumers build their confidence and knowledge as they advance toward their financial goals.

It’s back to school season, so let’s have the #MoneyTalk

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With every new school year, your kids get closer to the time when they’ll live their own financial lives. It’s a good time to think about how kids are learning sensible money habits, in school, at home, and in the community. For younger kids, maybe their classroom exercises feature math and money. For teens, they may be able (or even required) to take a personal finance class. Schools, educators, and other organizations offer chances to explore financial games, apps, clubs, and activities. Parents can be a powerful ally in helping these money lessons take root, because research shows that parents have the strongest influence on the way their kids think about money.

Join us next Tuesday, August 27 from 1-2 p.m. ET on Twitter. Just follow along with the hashtag #MoneyTalk; we’ll be joined by folks from Kids.gov and the Jump$tart Coalition.

Let us know if you’re coming by emailing us at FinancialEducation@CFPB.gov.

Got questions about age-appropriate activities for your kids? Just Ask CFPB or submit a question of your own. It’s never too early to help your kids make smart money choices – and it’s never too late.

 

December in August

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August is usually a time when military families are wrapping up duty station moves, squeezing in summer vacations, and getting the kids enrolled in school. The hazy days of summer are not exactly the time when military parents (or kids) are thinking about December holiday wish lists, door-buster sales, and gift wrapping.

But, believe it or not, the holiday shopping season will be upon us in just three short months. You may not be ready to see Halloween candy at the drugstore yet, let alone think about December holiday celebrations. But, preparing for your holiday spending now can help you avoid being served a heaping side of seasonal debt along with your plate of turkey and stuffing. So, here are a few ways you can start your December in August.

Set reasonable expectations

Last year, it was reported that the average American expected to spend $854 on gifts during the holiday season. While many people won’t spend that much on shopping, any spending that strains your finances or saddles you with post-holiday debt is bad for your financial future —period. Take the time now to talk with family and friends about realistic holiday spending limits. Consider less expensive gift options like homemade gifts. If you have a large extended family, maybe it’s time to start a new tradition of picking one person out of a hat to buy a gift for, rather than everybody buying a gift for every single other person in the family.

Plan, budget, and save

Figuring out who’s on your gift list, creating a holiday budget, and gradually setting money aside can help you avoid overspending, unwanted debt, and financial stress. You can find helpful budgeting tools on mymoney.gov. Also, check with your bank or credit union to see if they offer a Christmas club or holiday savings accounts that you can use to save for your holiday goals. Old-fashioned layaway is another option.

Keep the big picture in mind

It can be easy to forget that we spend a lot of money on other things besides gifts during the holidays. Big holiday dinners, travel to see family and friends, and even increased electricity costs to run that massive holiday light display can drain your bank account. Make sure you plan for the cost of all of your extra holiday activities.

Look for ways to save

Doing things like catching early sales, comparison shopping, ordering from sites or stores that offer free shipping, shopping at discount stores, and buying items that offer rebates can help save you money on holiday purchases. Saving money for your shopping and saving money while you’re shopping should be a dual goal.

Watch out for costly surprises

Make sure you fully understand the term and conditions if you’re using gift cards or layaway plans. For instance, expiration dates, inactivity rules, and hidden fees on gift cards can eat away at their value if you’re not careful. Take the same cautious approach with store credit cards that you’re offered at checkout. They might save you a few bucks at the register today, but stick you with very high interest rates later.

Avoid holiday debt traps

Not all deals are a bargain, so don’t get sucked in by holiday “super sales”. If you rush to a store sale because you can get a $3,000 TV for $2,000, you’ve still spent $2,000 on a TV. Was that really something you had planned to do? Also, don’t be enticed by payday lenders who want to “help” you get your hands on holiday cash. Proper planning and saving long before the holiday can help you avoid a cycle of high-interest debt that can last for weeks or even months after the holidays are over.

Keep in mind that holiday spending is short-term spending. Once the unwrapping frenzy is over, how long does the excitement last? Saving your money for long-term goals like home ownership, college or a comfortable retirement may be the very best gift you can give yourself and your loved ones.

Updates to remittance transfer rule resources and a correction to the rule

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We strive to make financial markets work for both consumers and the entities we regulate. Critical to that goal is making sure that businesses – both small and large – have what they need to understand and comply with our new regulations, which are designed both to help consumers and make a fair playing field for companies that play by the rules.

Today, we’re releasing an update of our small business guide for our international electronic money transfers rule (also known as the remittance rule). This updated guide reflects the most recent changes to the rule and will make it easier to understand the requirements, which will take effect on October 28, 2013. Although the guide is not a substitute for the rule, it highlights issues that businesses, in particular small businesses and those that work with them, should consider while implementing the new requirements.

Along with the guide, we are releasing a video that gives an overview of the rule, the recent changes, and our responses to questions raised regarding interpretation and implementation of the rule.

These versions of the guide and video replace those versions released in late 2012 and which are now out-of-date.

We are also making a technical correction to the remittance rule to make a clarification and correct an error to the May 22, 2013 amendments.

More compliance resources

We have some more information to help industry understand and comply with the new requirements, including:

A closer look at the trillion

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A few weeks ago, we released new estimates on the size of the student loan market, which is approaching $1.2 trillion, with federal student loans crossing the $1 trillion mark. While there’s been a lot of discussion about changes to federal student loan interest rates on new loans, many of you have asked: what’s happening with the trillion that’s already been borrowed?

We took a closer look and here’s what we found: there are over 7 million borrowers in default on a federal or private student loan. We also estimate that roughly a third of Federal Direct Loan Program borrowers have chosen alternative repayment plans to lower their payments.

To learn more, we decided to analyze data released from the Department of Education, pulled from the National Student Loan Data System. We took a close look at the Federal Direct Loan and the Federal Family Educational Loan (FFEL) Programs. Federal loans also include the campus-based Perkins Loan program, which represent less than 1% of the total outstanding. The data below represent loan status as of June 2013.

Repayment status for federal student loan programs

Outstanding balance including accrued interest in billions of dollars

In-school Grace Repayment Deferment Forbearance Default Other Total
Direct 133.8 (24%) 40.4 (7%) 237.4 (42%) 75.6 (13%) 48.3 (8%) 30.5 (5%) 3.2 (1%) 569.2 (100%)
FFEL 12.2 (3%) 6.6 (2%) 256.3 (60%) 46.5 (11%) 42.8 (10%) 58.8 (14%) 6.3 (1%) 429.5 (100%)

Number of recipients in millions

In-school Grace Repayment Deferment Forbearance Default Other Total
Direct 7.9 (28%) 1.9 (7%) 10.8 (39%) 3.2 (12%) 1.8 (6%) 2.1 (8%) 0.1 (0%) 27.8 (100%)
FFEL 0.9 (4%) 0.5 (2%) 12.9 (56%) 2.3 (10%) 1.6 (7%) 4.4 (19%) 0.3 (1%) 22.9 (100%)

It’s hard to compare the Direct and FFEL programs to each other, since a much larger portion of Direct Loan borrowers are still in school. In addition, no new loans have been made through the bank-based FFEL program since 2010. Many borrowers have both types of loans. Here’s a closer look at the estimated average balance for borrowers in each loan status:

Average balance by repayment status for federal student loan programs

Outstanding balance including accrued interest in thousands of dollars

In-school Grace Repayment Deferment Forbearance Default
Direct 16.9 21.3 22.0 23.6 26.8 14.5
FFEL 13.6 13.2 19.9 20.2 26.8 13.4

A noteworthy number of borrowers are in default. Defaulting on a federal student loan has serious consequences. Unlike other consumer credit, borrowers in default on a federal student loan might see their tax refund taken and their wages garnished without a court order. However, there are options to get out of default and get the default notation on your credit report removed.

There are ways to avoid default on a federal student loan, even when you think you can’t afford your payment. Here’s a closer look at the repayment plans Direct Loan borrowers are choosing:

Repayment plan choices by federal direct loan borrowers

Includes loans with known status in repayment, deferment, and forbearance

Outstanding balance
Billions of dollars
Recipients
Millions of recipients
Average balance
Thousands of dollars
Standard 10-year plan 139.9 9.84 14.2
Plans based on income 72.3 1.58 45.8
Income-contingent repayment 20.1 0.63 31.9
Income-based repayment 50.9 0.91 55.9
Pay as you earn 1.3 0.04 32.5
Plans not based on income 107.4 3.35 32.1
Extended repayment 62.1 1.63 38.1
Graduated repayment 27.8 1.27 21.9
Extended graduated repayment 17.5 0.45 38.9
Other alternative repayment plan

4.4 0.23 19.1
Total of loans in these plans 324 15 21.6

Borrowers looking to reduce their payments can choose a plan where their monthly payment can be tied to a portion of their income after submitting documentation. The newest of these plans is Pay As You Earn, where your payment is equal to roughly 10 percent of your income above the poverty line. After 20 years, any remaining balance you might have is forgiven.

There are also plans that allow you to extend your payments over a longer time period (extended repayment) or to have your payments increase over time (graduated repayment). You can also combine both features (extended graduated repayment). All of these plans will incur more interest over the life of the loan, but don’t require much documentation to enroll in.

Roughly a third of Direct Loan borrowers in repayment, deferment, or forbearance are enrolled in an alternative repayment plan. Most of these borrowers are enrolling in plans that don’t require income documentation. Based on the average balances we estimate for borrowers in each plan, it’s possible that many borrowers in plans not based on income might be better off with an income-based plan. If borrowers were aware of and able to easily enroll in income-based plans through their servicer, many federal student loan defaults could have been avoided.

We recently released a report that analyzed input from consumers, industry, and experts about the potential impacts of unmanageable student loan debt and how to spur affordable repayment and refinance options for private student loan borrowers.

We’ll keep monitoring the student loan market to understand how it’s working and to help consumers navigate a complicated system. To learn more about student loans, check out Ask CFPB. You can also check out reports and other information on our work for students, visit consumerfinance.gov/students.

Rohit Chopra is the CFPB’s Student Loan Ombudsman.

What we’re hearing from private student loan borrowers

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Today, we released a mid-year update analyzing complaints from private student loan borrowers. The update explores some of the challenges consumers face when dealing with their lenders and servicers.

Last October, we published a report that detailed problems reported by borrowers. We found that student loan borrowers expressed frustration about their lack of repayment options and their inability to refinance or modify their loans. In addition, we saw many examples of active-duty servicemembers having difficulty accessing benefits under the Servicemembers Civil Relief Act (SCRA).

Lenders and servicers reported that these publications provided a helpful roadmap on ways to improve customer service.

Since then, consumers have voiced some of the same concerns, but we have also identified some emerging challenges. Complaints submitted since October revealed borrowers had a number of concerns about processing of payments, obtaining documentation about their loans, finding accurate information about their loan status and repayment options, and accessing basic account information.

While some lenders and servicers are addressing concerns about difficulties faced by military borrowers, the problem has not gone away. Regrettably, we continue to receive complaints from servicemembers with student loans having trouble accessing benefits under the SCRA.

Read the full mid-year update.

Having trouble repaying a student loan? Check out our Repay Student Debt tool. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.

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.