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February 28th, 2013

CFPB: Fixing student loans in an effort to help housing

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SchoolThe Consumer Financial Protection Bureau (CFPB) is gathering information to help develop policy options that might aid borrowers struggling to repay private student loans. This issue is important in part because people burdened by student loans are less able to finance a home purchase.

Specifically, the CFPB is seeking input on such issues as:

  • How student loans affect the U.S. economy and consumers’ access to mortgages and car loans
  • How distressed borrowers manage their student loan obligations
  • What options borrowers currently have to lower their private student loan payments
  • Examples of alternate payment programs that might apply to student loans
  • Effective mechanisms for communicating with distressed borrowers

CFPB Director Richard Cordray said in a statement that too many private student loan borrowers are struggling with debt that prevents them from climbing the economic ladder.

“We will be analyzing plans for policymakers to consider that might help avoid a repeat of the mortgage meltdown for today’s student loan borrowers,” Cordray said.

Easier repayment terms for student loans could help people better position themselves to buy a house.

Comments will be accepted until April 8, 2013.

Bank expect higher student-debt delinquencies

Student loans continue to be a subject of concern for lenders, according to FICO, a credit scoring and analytics company in San Jose, Calif.

In a recent quarterly survey of 251 U.S. bank risk professionals, FICO found a generally positive outlook for consumer credit health, but heightened expectations of rising delinquencies on student loan debt. This marked the fifth consecutive quarter in which a majority of survey respondents offered a pessimistic outlook for student loans.

An October 2012 CFPB report found borrowers had trouble negotiating affordable repayment plans for private student loans, which aren’t designed with income-based payment options. This report recommended that policymakers explore ways to encourage alternative repayment and refinance options for student loan debt.

An earlier study by the Pew Research Center found 19 percent of U.S. households owed student debt in 2010, a significant rise compared with the 15 percent of households that owed such debt in 2007. A record 40 percent of households headed by someone younger than 35 years old owed student loan debt, the highest proportion by far among any age group. The average outstanding student loan balance was $26,682.

Unpaid loans impede future borrowing

“As more people default on their student loans, their credit ratings will drop, making it harder for them to access new credit and help grow the economy,” Dr. Andrew Jennings, FICO’s chief analytics officer, said in a statement. “Even people who stay current on their student loans are dealing with very large debts, which reduces the money they have available to spend elsewhere,” Jennings said.

That elsewhere spending certainly includes housing and costs related to homeownership.

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7 Responses to “CFPB: Fixing student loans in an effort to help housing”

  1. Loyalty Love Says: March 4th, 2013 at 9:54 pm

    This is awesome that someone can actually see Student Loans to be apart of a hardship which is changing lives. Right now I’m in a situation where the loan is high to pay but, it has to be done so I’m able to get on my feet to one day own my own home. Looking forward to ways of bringing the payment down and it’s ironic how my job never brought to my attention I was eligible for a 10 year plan of paying and the rest of the loan would be written off. So now I’m just beginning in my years of paying off my loan & it’s a little overwhelming but, it needs to be done. Help is good to prepare for future plans. Anything to assist people who have Student Loans are a plus.

  2. Usda Housing Says: March 5th, 2013 at 3:33 am

    There is merely no thanks to escape the U.S. Department of Education and their army of personal collection agencies that collect on their behalf. additionally, Sallie Mae, the nation’s largest student loan lender, has been getting collection agencies to trace you down.

  3. Student Loan Debt & Homeownership - A Tricky Combination Says: March 7th, 2013 at 9:00 am

    [...] to reports, the CFPB has begun collecting information on how student loans affect consumer access to mortgages [...]

  4. Student Loan Debt & Homeownership - A Tricky Combination | Miami Agent Magazine Says: March 7th, 2013 at 9:01 am

    [...] to reports, the CFPB has begun collecting information on how student loans affect consumer access to mortgages [...]

  5. Student Loan Debt & Homeownership - A Tricky Combination | Houston Agent Magazine Says: March 7th, 2013 at 9:03 am

    [...] to reports, the CFPB has begun collecting information on how student loans affect consumer access to mortgages [...]

  6. Tim Manni Says: March 12th, 2013 at 3:24 pm

    Loyalty Love: We appreciate your comment. Thanks for sharing and good luck. Keep us posted.

    -Tim (HSH)

  7. Mortgage Shopping for Those With Student Loans Says: March 20th, 2013 at 8:07 pm

    [...] is always a factor in whether you can qualify for a home loan. But whether student loans, in particular, present any special concerns is a matter of [...]

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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