CFPB Private Student Loan Report Sparks Regulatory Debate on Capitol Hill

CQ

On the heels of a new report that showed lax lending practices caused private student loan debt to balloon over the past decade, Democrats vowed at a Senate hearing Tuesday to seek legislative solutions, while Republicans resisted such regulatory efforts.

“Private loans are the riskiest way to pay for college and, unlike federal student loans, are less likely to come with affordable payment plans, loan forgiveness, deferment options or cancellation rights,” said Sen. Sherrod Brown, D-Ohio, chairman of the Banking, Housing and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection. “And their numbers have increased. This is troubling.”

Panel Democrats said they are pursuing both short- and long-term solutions to curb private student loan debt, including a recommendation by the Consumer Financial Protection Bureau (CFPB) to allow borrowers to discharge student debt in bankruptcy.

But subcommittee ranking Republican Bob Corker of Tennessee raised concerns with that suggestion.

“I just find it fascinating that one of the first things you would do as the consumer protection agency is get us to consider ... students being able to file bankruptcy, which is one of the most damaging things a consumer can do,” said Corker, who noted that private loans make up only 7 percent of the overall student loan debt. “I think it’s important for us to focus on the big picture and not just the private loans.”

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CFPB Private Student Loan Report Sparks Regulatory Debate on Capitol Hill »