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U.S. Urges Private Lenders and Servicers To Help Borrowers

01/10/2014

Inside Higher Ed. Jan 10, 2014.

Top Obama administration officials on Thursday summoned the heads of more than a dozen financial institutions and loan servicing entities to the Treasury Department to discuss ways to improve the private student loan market. Education Secretary Arne Duncan, Consumer Financial Protection Bureau Director Richard Cordray and Acting Deputy Treasury Secretary Mary Miller were among the administration officials and government regulators who met with executives from the largest student lenders and servicers.

“Participants discussed strategies to assist borrowers in successfully managing their private student loans, including servicing best practices and approaches to private student loan modifications and refinancing,” according to the Treasury Department’s account of the closed-door meeting.

Miller urged the banks and loan servicing companies “to continue their efforts to expand options for repayment in the private student loan marketplace,” the department said. "Private student lenders and servicers can and should do more to offer more affordable repayment options so borrowers can avoid default," Cordray said in a statement after the meeting.  

Cordray’s agency has been critical about some practices in the private student loan market. The CFPB previously raised concerns about problems with the servicing of private student loans, especially with regard to military service members. Starting in March, the bureau will begin more closely monitoring of the largest student loan servicing companies. Private lenders and loan servicers have also drawn scrutiny from consumer advocates and several members of Congress. A group of Senate Democrats is pushing legislation by Sen. Dick Durbin of Illinois that would increase regulation of private student loans and how companies service those loans.

Attending the meeting from the private student loan industry included executives from: Sallie Mae, Wells Fargo, JP Morgan Chase, RBS Citizens Financial, PNC Financial Services, CommonBond, SunTrust Banks, Discover Financial Services, American Education Services (also known as the Pennsylvania Higher Education Assistance Agency), Great Lakes Higher Education Corporation, and the Missouri Higher Education Loan Authority.