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From Banking and Finance Law Daily, August 29, 2013

CFPB unveils public service student debt toolkit

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has announced a new toolkit intended to empower school districts and other public service organizations to help their employees pay off student loan debt. The bureau is asking employers to inform employees of their options.

In a report on public service and debt released on Aug. 28, 2013, the CFPB estimates that more than 25 percent of the U.S. labor force is in public service. Many public service fields face major workforce shortages in the coming years, the bureau said. For many new employees in these professions, low starting salaries and low wage growth make repaying student debt a challenge.

The toolkit—the Employer’s Guide to Assisting Employees with Student Loan Repayment— was developed to help employers provide information about loan forgiveness programs to their employees. The toolkit offers practical advice to public sector employers and employees and advises that an early start can make the difference of thousands of dollars. The toolkit includes:

  • an action guide for employers that outlines steps they should take to provide information to their employees, such as helping employees certify and checking in with them annually about their repayments;
  • an action guide for borrowers that tells them how to qualify for benefits, what their options are, and important things they should consider;
  • a sample letter from public service employers to employees that says they are a qualified employer under the federal Public Service Loan Forgiveness program; and
  • a set of frequently asked questions.

Public service pledge. The CFPB also announced a new public service pledge on student debt intended to empower public service employers to help their workers with student loans. The pledge asks employers to make a commitment to talk to their workers about student debt, help them understand their options, and assist them in enrolling in student loan repayment benefits. Richmond Public Schools in Virginia and the City of South Bend, Ind., have signed on to the pledge, the bureau said.

Cordray remarks. Richard Cordray, director of the CFPB, said on a press call that student loans are a “growing burden.” Student loans are the second largest source of consumer debt after mortgages, Cordray said. “Student debt has become a yoke around the necks of many of our best and most talented young people, preventing them from moving forward and leading us into America’s future.”

Cordray stressed the special circumstances of employees in the public sector—teachers, soldiers, firefighters, and police, for example. “People give up higher incomes to serve their city, their state, or their country. We believe that people who contribute part of their talents, part of the benefits of their education, to society as a whole should not be mired in debt because they stir themselves to the calling of public service,” Cordray said.

The CFPB director said that there are programs that exist to help public employees pay back student loans, but not everybody is aware of their existence. Part of the bureau’s new initiative is to provide information as to options that exist for public employees, he said. One of these programs is the Public Service Loan Forgiveness, created by Congress in 2007. The program allows some federal student loans to be forgiven after 10 years of on-time monthly payments.

RegulatoryActivity: CFPB Loans

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