By Katalina M. Bianco, J.D.
As the new school year kicks off, the Department of Education and Consumer Financial Protection Bureau are taking a closer look at student financial aid. Thus far, the industry is not making the grade.
The Department of Education has been hard at work implementing the Obama Administration’s Student Loan Aid Bill of Rights. In today’s Treasury Notes, Treasury reposts a DoE blog post detailing its latest steps toward helping student loan borrowers manage their loan debt.
Last year, President Obama launched an initiative intended to ensure strong consumer protections for student loan borrowers and issued a Presidential Memorandum as a step toward implementation of the plan. In March of this year, the president created the Student Loan Aid Bill of Rights, and In July, the DoE announced it was expanding the program with plans to provide an additional six million federal loan borrowers access to student loan payments capped at 10 percent of income.
DoE activities. Since its update last month, the DoE has taken further action to put the initiative in place. Federal Student Aid (FSA) released the recommendations from an interagency task force on best practices in performance based contracting to better ensure that servicers help borrowers make affordable monthly payments. As directed by the Presidential Memorandum, the task force reviewed input from its members in July and consulted with the CFPB and other agencies experienced in the areas of performance-based contracts, student lending, and servicing.
CFPB steps up. The CFPB has updated its consumer advisories to caution students about college-sponsored banking accounts and debit cards. The bureau is concerned that students are not comparison shopping for the best loan terms but simply buying what's offered on campus. While it's not a foregone conclusion that a partnership between college and financial institution may not be best for students, the CFPB advises students to refrain from automatically signing on the dotted line before doing a bit of due diligence.
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