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From Banking and Finance Law Daily, April 28, 2016

Payback Playbook gives student loan borrowers level playing field

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau, joined by the Treasury Department and Department of Education, has unveiled the Student Loan Payback Playbook, a resource intended as a new way for student loan servicers to communicate with borrowers and help those borrowers better understand their repayment options. The playbook is a result of the agencies’ attempts to address the problems in student loan servicing that have been highlighted in the past year.

“A college degree is one of the best investments a student can make in his or her future, and it remains the clearest path to the middle class,” said Secretary of Education John B. King Jr. “We want student borrowers to know that they have the support they need to manage their debt and navigate the options available to them to pay back their loans.”

Cordray remarks. In his prepared remarks for a press call about the playbook, CFPB Director Richard Cordray noted that approximately 43 million consumers owe student loan debt, and outstanding federal student loan debt has more than doubled in less than a decade to about $1.3 trillion. “That is more, in fact, than any other category of consumer debt in America, except mortgages.” An estimated one-in-four student loan borrowers is either delinquent or in default, and many more are falling behind and struggling with repayment.

“Protections are widely available to help federal student loan borrowers afford their monthly payment and stave off default,” Cordray said. Borrowers have the right to choose among different plans, such as income-driven repayments, but they must know about those options. Borrowers also need accurate information from loan servicers about account features, loan terms, and borrower protections. “That is the point of the Payback Playbook.”

Playbook features. The Payback Playbook contains personalized information about income-driven repayment plans for federal student loan borrowers. It is set up to help borrowers map out a course of action to arrive at a payment they can afford. “Students who borrow tens of thousands of dollars to finance their education must be able to trust their loan servicers to provide them with essential information,” the bureau director said. “This new resource will help put into practice the statement of principles for student loan servicing that we jointly released with the Department of Education and the Department of the Treasury last fall.”

The playbook provides options to a fixed, 10-year repayment plan. One option is a graduated repayment plan—a “less now, more later” plan. The second option is an income-driven repayment plan. The chart provides information on estimated monthly payments under each plan and how that payment would change over time depending on the option chosen. Finally, borrowers are reminded that there is never a fee to change their repayment plans.

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