The Consumer Financial Protection Bureau recently asked the public what it can do to improve student loan servicing through a request for information (RFI). Response to the RFI, which closed on Monday, was overwhelming: over 30,000 people and organizations submitted comments. We submitted our own comment letter as well as joined with over 100 organizations from across the country urging the CFPB to improve student loan servicing. Many student loan borrowers told stories about their difficulties repaying their loans, like these borrowers who we profiled in our comment letter about Sallie Mae earlier this month:
“I currently do an income based repayment with the federal loans and my payment is $0.00 a month. However I have a private loan through Sallie Mae that is about to go into default because I can't afford to pay the minimum payment. Sallie Mae continues to hound me for money because my account is past due but still refuse to work with me on repayment. I am seriously considering filing bankruptcy because I don't know what else to do.”
”I need to figure out a refinancing or rate reduction plan with Sallie Mae before I suffer from delinquency, which could happen as soon as XXXX months from now when I move and settle in a different area. I'm filing this complaint because Sallie Mae is not willing to work proactively with me as a borrower to stop delinquency, forbearance, or bankruptcy from happening."
In the RFI, the CFPB asked what lessons we could learn from public data on other financial products in order to improve publicly-available data on student loans. The CFPB acknowledged that current data on the $1.2 trillion of outstanding student loan debt is extremely limited.
Consumer advocates are well-acquainted with the forty-year-old Home Mortgage Disclosure Act (HMDA), which reports loan-level data on the vast majority of mortgages originated every year, including key characteristics of the borrower and the loan. HMDA has played a major role in efforts to hold banks accountable for meeting community credit needs. At Woodstock Institute, we’ve used HMDA data to analyze neighborhood credit needs and gaps, comment on Community Reinvestment Act (CRA) examinations, develop and monitor community investment agreements with financial institutions, document disparities in mortgage lending to low-wealth communities and communities of color, and more. Unfortunately, other financial products with large impacts on consumers—such as student loans—do not have a comparable public data source that allows advocates to monitor lenders and push for policy change.
In our comment letter, Woodstock Institute argued that many of the reasons for creating the Home Mortgage Disclosure Act also motivate the need for better student loan data. Advocates need data on both sectors in order to determine whether lenders are serving the needs of their communities, assist public officials in distributing public dollars, and assist in identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. In addition, both sectors need better data on what happens to loans after they are originated. The Federal Housing Finance Agency is currently developing the National Mortgage Database to collect and publish data on how mortgage servicers are handling loans and borrower repayment activity.
Consumer advocates have a number of concerns about the impact of student debt on educational and economic opportunity that cannot be addressed by the existing publicly available student loan data. For example, our research raises questions about whether student debt is disparately impacting students of color or students at certain kinds of institutions. With more complete data, we could further investigate reasons for the disparities in debt loads, identify particular institutions or lenders with high levels of disparities, and use these findings to urge regulators to investigate or take further action. Better data would improve our understanding of how different servicers are working with borrowers who struggle to repay their loans, help us identify loopholes in regulations designed to hold schools accountable for educations quality, and make the case for strong student loan servicing standards.
Based on our experiences with HMDA and other financial services datasets, we recommended that the CFPB work towards a student loan dataset with as much geographic granularity as possible while still preserving students’ privacy and ensure that the data is released regularly enough to effectively track trends in the student loan market. Expanded student loan data should include information on borrower demographics, borrower and co-signer financial characteristics, school characteristics, loan characteristics, and loan performance.
As our partners at the National Community Reinvestment Coalition say, “data drive the movement.” The movement for student loan accountability would be more effective with robust public data in its toolset.