The government is hoping that a new form will help the more than 43 million consumers who owe federal student loans find the most affordable repayment plan.
The Consumer Financial Protection Bureau on Thursday introduced a mock-up of a disclosure form called the Payback Playbook that lenders will provide to borrowers. The form shows different personalized options for paying back the loans based on the borrower’s income.
Each option would be described in plain English and include the number of payments over the life of the loan, the monthly payment amounts and whether payments will change over time. The form would be included with a borrower’s mailed monthly statement or will appear when they log on to their student account.
It is a small step toward alleviating what has become a ballooning problem for many Americans. Federal student loan debt has more than doubled to roughly $1.3 trillion over the last decade. One in four student loan borrowers is either delinquent or in default. But 70 percent of default borrowers qualify for a lower monthly plan based on their income.
“This tells us that millions of borrowers may be failing to receive critical information about repayment options or are encountering communication breakdowns when they try to enroll,” said CFPB Director Richard Cordray in his prepared remarks. “Attending college should not require students to shoulder a lifetime of loan payments they cannot afford.”
The CFPB is welcoming public comment on the disclosure form through June 12. Using the feedback, the Department of Education will finalize the disclosures that will be used by lenders.