CFPB Monitor News Guidance Perspectives of CFPB | Ballard Spahr Law Firm Blog

CFPB’s “Paying for College” site continues to evolve

Posted in Student Loans

Last week Peter Jackson, the Senior Advisor for Communications at the CFPB, put up a post on the CFPB’s blog  describing the CFPB’s “Paying for College” web tools, which are currently in a beta stage and which are still continuing to evolve.  In fact, the CFPB invites consumers and “stakeholders” to continue to comment on the site.

Regrettably, though, the post begins by continuing the CFPB’s practice of hammering on the total outstanding student debt, without any effort to put that figure in perspective, either by indicating what the total debt is for the average student following graduation ($26,600 in 2011, according to The Project on Student Debt) or how the average student is handling that debt (in a bad economy, over 73% are current, according to the NY Fed, and according to Moody’s, in the second quarter, the default rate on securitized private student loans was only 4.2%). 

Instead, we’re treated to the now constant refrain as to how the total outstanding student debt is more than the total outstanding credit card debt and more than the total outstanding car loan debt.  Frankly, that continues to perplex us.  Yes, it’s a big number, but as a society, aren’t we better served by having consumers investing in their educations rather than buying cars or running up their credit card bills?

What’s even more discouraging is that there is an accompanying video that does provide some perspective (it even includes average debt amounts from 2010), but there is nothing in the text of the blog post that would make that clear or that would direct you to the good news in the video, in which CFPB Deputy Director Raj Date acknowledges that over the course of his or her career, a student with a bachelor’s degree is still projected to earn over $1 million more than a student with a high school diploma.

Nonetheless, it’s certainly true that college is expensive and that consumers should invest wisely and should make good choices.  How then, does the site help consumers do that?  The CFPB drew some conclusions about how students decide how they will pay for college based on interviews with students and high school guidance counselors (but, oddly, apparently not parents or other family members). 

The CFPB then interviewed “financial experts, lenders, policy wonks, and thousands of people” to determine what tools would have helped students make better decisions.  They then distilled that information down further, and now provide general guidance on their site on how to choose the right loan, compare financial aid offers, manage money while in college (really, minimize bank account fees), and repay student debt.

We hope the site will continue to evolve and that the information provided will continue to improve.  For example, we’d like to see the CFPB disclose, as it did in its Private Student Loan Report, that there are bank lenders that offer fixed rates that compete with Stafford loan rates and we’d like to see the CFPB confirm, as it could do with a little investigation, that there are state agency lenders that offer fixed rates that are better than PLUS loan rates and that may even be better than unsubsidized Stafford loan rates.

And, in all fairness, we think the CFPB would be well advised to caution consumers, in a more conspicuous way, that private student loans may often go into default even earlier than the 120 days currently stated on the site.  That could give rise to some unreasonable expectations, since a number of private student loans may be in default as soon as a payment is missed (or at least permit the lender to declare the loan in default as soon as a payment is missed).