The student loan crisis visits Capitol Hill today.
The topic: how the $1.6 trillion student loan crisis is more than a debt problem.
Here’s what you need to know.
Student Loans: $1.6 Trillion Issue
Student loan debt, principally, has been an issue of borrowing and repayment. Today, a congressional committee will focus on consumer financial protections for borrowers and associated legislative proposals to help ease the burden of student loans.
First, the latest student loan debt statistics:
- Total Student Loan Debt: $1.6 trillion
- Total Borrowers: 44.7 million borrowers
- Student Loans: second highest consumer debt category after mortgages
- Late Payments: 20% of borrowers in repayment are behind on their student loan payments
- Student Loan Default: 10.9% of student loans are at least 90+ days delinquent
- Student Loan ServicersStudent loan servicers are the primary point of contact for student loan borrowers: they collect student loan payments, answer questions and help enroll borrowers in student loan repayment plans. According to the U.S. House Financial Services Committee, consumer and federal watchdogs have said that student loan servicers failed student loan borrowers in several ways, including, for example:
- 71% of student loan borrower complaints were issues related to a lender or servicer.
- 35% of borrowers said they had difficulty accessing information about their student loans and repayment status.
- 59% of borrowers received unclear guidance from their student loan servicer about student loan repayment options.
- 42% of borrowers reported having trouble changing to a different repayment plan when they faced financial hardship.
- 99% of borrowers were rejected for public service loan forgiveness.
“The student loan debt crisis is a consumer protection crisis,” said Seth Frotman, former student loan ombudsman and consumer protection advocate, according to prepared testimony before the committee. “…We encouraged millions of students to take on billions in debt. And then, to add insult to injury, we sent them into a market with a piecemeal consumer protection framework that buckled under the weight of this historic burden.
While federal student loans offers borrowers protections ranging from forbearance to deferral to help during economic hardship, the committee wants to explore ways to increase consumer protections for borrowers (and co-signers) of private student loans. That said, many private student loan lenders allow borrowers to defer their payments if they face economic hardship.