By Ellyn Fortino
The Consumer Financial Protection Bureau (CFPB) has launched a public inquiry into student loan servicing practices and ways to help ease student debt stress.
Public feedback is being sought by CFPB on "industry practices that create repayment challenges, hurdles for distressed borrowers and the economic incentives that may affect the quality of service." The public comment period opened May 14 and will run through July 13.
CFPB's probe into the matter is part of a collaboration with the U.S. education and treasury departments to "identify initiatives to strengthen student loan servicing."
Consumer advocacy groups are encouraged by CFPB's broad review into industry practices.
"With student loan debt surpassing $1.2 trillion dollars, and 8 million student loan borrowers already in default, this an issue of the utmost importance," said Katie Buitrago, senior policy and communications associate at the Woodstock Institute. "We support the CFPB's efforts to gather information and use its authority to best protect consumers."
The CFPB's inquiry comes on the heels of new research by the Woodstock Institute detailing student loan burdens at for-profit colleges, which have come under increased public scrutiny over a variety of exploitative and fraudulent practices uncovered in recent years at a number of institutions.
It also follows the April closure of the for-profit behemoth Corinthian Colleges Inc, which was rocked by various government lawsuits over, among other allegations, predatory loan practices. Corinthian Colleges, which filed for bankruptcy earlier this month, shut down shortly after the U.S. Department of Education slapped the for-profit college network with a $30 million fine for misrepresenting job placement rates.
"New revelations are appearing every day about deceptive and abusive practices at some for-profit colleges, including recent bankruptcy and enforcement actions against the Corinthian Colleges chain," Buitrago said. "Regulators and law enforcement should continue to investigate the for-profit college practices that are generating higher debt loads--and poorer educational outcomes."
When it comes to student loan burdens at for-profit colleges, the Woodstock Institute's study showed that students at two-year for-profit colleges are nearly 50 percent more likely to borrow, and typically borrow more, than their counterparts at two-year public colleges. During the 2011-2012 school year, the amount borrowed by students at two-year for-profit colleges averaged $1,300 more than those borrowing to attend two-year public colleges.