The Consumer Financial Protection Bureau is launching an investigation into the private student loan industry, which it will publish as a report to Congress.
The CFPB will collect information from students, families, the higher education community and the student loan industry about the roles of schools in the market for loans, terms of repayment, loan modifications and more.
Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010, establishing the CFPB.
The brainchild of Harvard professor and U.S. Senate candidate Elizabeth Warren, the CFPB’s core duties, as listed on its website, include:
Conducting rule-making, supervision and enforcement for Federal consumer financial protection laws;
Restricting unfair, deceptive or abusive acts or practices;
Taking consumer complaints;
And promoting financial education.
Some members of the AU community have received the news enthusiastically.
“It’s important that this issue is raised,” said Tom O’Connor, a freshman in the School of International Service and self-described “student activist” in the A New AU campaign. “Any sort of investigation, any sort of oversight, is required.”
O’Connor finds it troubling that Sallie Mae, the biggest lender of private student loans in the United States, was both a lender and collector of loans.
“People who lend out these loans should do so honestly and responsibly,” O’Connor said.
Jake Coz, a freshman in the College of Arts and Sciences, agreed “the government has a right to investigate fraud.”
However, Coz argued that an investigation should be done only if there’s reason to think fraud has occurred.
“You can’t pull over a car unless there’s reasonable suspicion,” he said.
Coz said some members of Congress may consider a resolution to forgive all outstanding student debt loans. He said such a resolution should not pass.
“It’s someone else’s money, so you have an obligation to pay it back,” he said.
The CFPB investigation is the second recent initiative by the Obama Administration in regard to student loans. Last month, President Barack Obama signed his new “Pay As You Earn” proposal to extend income-based repayment, which allows borrowers to pay back their loans in smaller monthly payments based on their current incomes.
O’Connor said these recent actions show progress, but that there’s room for improvement.
He also said he will definitely respond to the CFPB’s call for information by providing his own personal experience on the website and urging his fellow students to do the same.
“It’s never counterproductive to have your voice heard,” he said.
