Feds to oversee PHEAA, other student loan contractors
When Zach Lee graduates from the University of Pittsburgh with a degree in studio arts this month, he'll join a growing pool of graduates shouldering student debt of $1.2 trillion.
Lee, who owes $22,000 in federal student loans and about $80,000 in private loans, was relieved recently to learn he could repay his federal debt in increments as low as $50 a month. He isn't sure what he'll have to pay on his private loans.
“I can only give them what I have to spare,” Lee, 22, said. For now, he's working at Giant Eagle and shopping his work to art galleries.
In response to mounting student loan debt and borrowers' problems with companies that service student loans, the federal Consumer Financial Protection Bureau announced on Monday that next year it will supervise at least seven non-bank contractors that handle more than 1 million accounts each.
That includes the Pennsylvania Higher Education Assistance Agency, or PHEAA, which has 12 million borrowers and $272 billion in student loans.
If the oversight works, Lee and millions of other borrowers will get better service and response from the giant companies with which the government and private lenders contract to collect and process student loan payments.
Federal officials said the need for additional consumer protection became clear as student loan debt grew, eclipsing the nation's credit card debt about two years ago. Among U.S. consumer debt, student loan debt is second only to mortgage debt.
Protection bureau Director Richard Corday said the change is in response to complaints from borrowers who had difficulty making prepayments or partial payments on loans, were unable to get information on payment options or incurred late fees because of paperwork or processing errors by companies.
“As the recession decimated the job market for young graduates, a growing share of student loan borrowers reached out to their servicers for help. The problems they have encountered bear a striking resemblance to the problems faced by home-owners in the run-up to the financial crisis,” Corday said, noting that one in five American households owes student debt.
In Pennsylvania, where a recent study found 70 percent of students took on debt for college, the average 2011 Pennsylvania college graduate owed $30,000, the second-highest figure in the nation.
According to the Project on Student Debt, average graduate debt included $24,251 from California University of Pennsylvania, $33,530 from Penn State University, $26,612 from Pitt and $27,502 from Duquesne.
Debt is a fact of life for many students, such as Pitt junior Renee Brown, who pays $100 a month on loans that she estimates will total about $40,000 by graduation.
“I'm not too worried about it,” said Brown, 20, of Troy in Bradford County.
Officials at PHEAA aren't concerned about more federal oversight.
“We don't anticipate any impact at all from the new rules. We've been working with the CFPB on this for some time already,” spokesman Keith New said.
Debra Erdley is a Trib Total Media staff writer. Reach her at 412-320-7996 or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Fall from Hazelwood roof kills man
- Icy roads, cold causing school delays, wrecks in Western Pa.
- German firm Nextbike to provide first 500 bikes for Pittsburgh sharing program
- With Pittsburgh charges, feds target Uganda-based counterfeiting ring
- Strip District merchants say pay stations will drive out shoppers relying on free spots
- Motivation in slaying of Penn Hills couple remains unclear
- Tax exemptions cost Allegheny County governments $620M, auditor general reports
- Thanks to $75K grant, startup to bring food to underserved in Pittsburgh
- Pittsburgh Public Schools adopts no-tax-increase budget for 2015
- Newsmaker: Gregory Reed
- Portion of Baum Boulevard closed after bricks fall from building