CFPB Report Highlights Highest-Risk Student Loan Borrowers
Fri 19 May, 2017 / by McIntyre & Lemon / Client Alerts
05/19/17 – The Consumer Financial Protection Bureau released a report showing that 9 in 10 of highest-risk student loan borrowers are not enrolled in federal affordable repayment plans.
The Department of Education estimates that more than 8 million federal student loan borrowers have gone at least 12 months without making a required monthly payment and have fallen into default. Nearly 1.2 million borrowers defaulted in the past year. These borrowers face negative consequences such as wage garnishment, loss of federal benefits, and negative credit history.
The Bureau’s analysis looks at hundreds of thousands of the highest-risk borrowers who are exiting default and may be eligible for federal programs that allow them to pay based on how much money they make. Student loan companies are responsible for informing borrowers about affordable repayment options that can help them stay on track.
Key results for borrowers in the Bureau’s sample include:
- 9 out of 10 of the highest-risk borrowers were not enrolled in an affordable repayment plan after rehabilitation;
- Nearly half of the highest-risk borrowers redefault if not enrolled in an affordable repayment plan, compared to less than 10 percent of those who are enrolled; and
- 95 percent of the highest-risk borrowers do not redefault within the first year when they consolidate into an affordable repayment plan.
This data offers new evidence that borrowers, taxpayers, and student loan companies would benefit from a clearer, more streamlined process to help previously defaulted borrowers succeed over the long term, and to ensure borrowers avoid default in the first place.