Federal consumer watchdog group open to ideas on easing student loan debt
Federal consumer watchdogs want to craft a plan to ease the sometimes-staggering burden of private student loans and announced Thursday they'll accept ideas from borrowers, lenders, schools and the public.
“Outstanding student debt exceeds auto and credit card debt,” said Rohit Chopra, student loan ombudsman for the federal Consumer Financial Protection Bureau.
“Saving for a home payment, buying a car or starting a business may be further out of reach for some,” he said, adding that 40 percent of all households headed by someone younger than 35 have student loan debt.
Private student loans can carry interest rates well above those on mortgages or auto loans because they are not backed by real assets, such as a car or real estate, putting the lender at a higher risk.
“I'm glad they're paying attention to this,” said Joseph White, 21, a senior at Carnegie Mellon University.
White said he's managed to limit his borrowing to $27,000 in federal loans, but he has many friends who face mountains of debt through private student loans.
“I have a lot of friends who have over $100,000 in loans. If I had to borrow that much, I don't know if I would be here,” he said.
A recent government report suggested about 850,000 borrowers have defaulted on more than $8 billion in private student loans, and thousands more may be delinquent. Private student loans represent less than $200 billion of the more than $1 trillion in outstanding student loan debt.
Chopra said there are indications that the cost of education and resulting student debt are making some people reconsider going into teaching and primary care medicine, both of which are predicted to experience personnel shortages in the next decade.
Dr. Richard Schott, a Philadelphia cardiologist who heads the Pennsylvania Medical Society, said his group is among those seeking relief.
“At the low end, we hear the debt for medical education and training is $200,000 and up. Medical student loan defaults are very low. But having interest forgiveness during training or debt forgiveness for practicing in under-served areas could be very beneficial,” he said.
Many stressed borrowers lack the kind of repayment options available on federal loans, such as income-based and graduated repayment plans, Schott said. Adding such options or allowing graduates who have entered the job market to refinance at lower rates could help ease the burden, he said.
He conceded the government has no legal authority to demand changes in private student loan payments.
“There are no mandates in this information request,” he said.
The information will be passed along to Congress.
“Policymakers may need to take steps to inoculate the economy from the burden of student loans on consumers,” Chopra said.
Debra Erdley is a staff writer for Trib Total Media. She can be reached at 412-320-7996 or firstname.lastname@example.org.