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CFPB Unveils Student Loan Payback Playbook to Provide Borrowers with Personalized Snapshot of Repayment Options
Friday, April 29, 2016 6:40 AM

Prototype Disclosures Outline Path to Affordable Payments for Borrowers Trying to Avoid Debt Distress

On Thursday, the Consumer Financial Protection Bureau unveiled the student loan Payback Playbook, a set of prototype disclosures that outline a path to affordable payments for borrowers trying to avoid student debt distress. The Payback Playbook provides borrowers with personalized information about their repayment options from loan servicers so they can secure a monthly payment they can afford. The Payback Playbook would be available to borrowers on their monthly bills, in regular email communications from their student loan servicers, or when they log into their student loan accounts.

“Millions of consumers needlessly fall behind on their student loan debt, despite their right under federal law to a payment they can afford,” said CFPB Director Richard Cordray. “The Payback Playbook, which has grown out of our joint work with Illinois Attorney General Lisa Madigan and her colleagues, is designed to help ensure student loan servicers provide personalized information, tailored to the borrower’s individual situation. This will help these borrowers take action, stay on track, and steer clear of financial distress.“

View the Payback Playbook prototypes.

About 43 million Americans owe student loan debt, with outstanding debt estimated at $1.3 trillion. The Department of Education offers numerous plans to borrowers with federal student loans that help make payments more affordable. These include options that let borrowers set their monthly payment based on their income. Repayment plan options for federal loans have expanded in recent years, but record numbers of student borrowers continue to struggle with debt. One out of four student loan borrowers are currently in default or scrambling to stay current on their loans, despite the availability of income-driven repayment options for the vast majority of borrowers.

According to a government audit, 70 percent of federal Direct Loan borrowers in default earned incomes low enough to qualify for reduced monthly payment under an income-driven repayment plan. These findings and the continued problems reported by student loan borrowers raise serious concerns that millions of consumers may not be receiving important information about repayment options or may encounter breakdowns when attempting to enroll.

Prototype Student Loan Payback Playbook

The first-of-its-kind prototype student loan Payback Playbook outlines repayment options for consumers who may be struggling to keep up with their monthly payment or trying to choose among dozens of plans. The Payback Playbook that most borrowers receive from their servicer will help cut through the clutter by clearly presenting three personalized repayment options. Struggling borrowers who have missed a payment or are at risk of default will receive a Payback Playbook that provides a single option with personalized instructions written in plain language describing how to lower their monthly payment. The proposed Payback Playbook features will include:

  • Personalized payment options: The Payback Playbook would require servicers to provide personalized information tailored to borrowers’ specific circumstances that show what their payments will be under different repayment plans. This information would include the number of payments over the life of the loan, monthly payment amounts, and whether payments will change over time.
  • No fine print: The Payback Playbook describes each option using clear, straightforward language that makes it easier for borrowers to understand the different plans, pick one that fits their financial situation, and stay on track.
  • Real-time, up-to-date information: The Payback Playbook provides borrowers with updated information when their plans or circumstances change so they can keep on top of their payments.  This includes how much longer they need to make payments until their loan is paid off or forgiven.

The Payback Playbook is available online and the public can provide feedback on these prototype disclosures through June 12, 2016. In the coming months, the Department of Education plans to finalize these disclosures, informed by the public feedback shared with the Bureau, to ensure that student loan servicers provide the information borrowers need to obtain monthly payments they can afford. The Department of Education, working with the CFPB, plans to finalize and implement these disclosures as part of the new vision for serving student loan borrowers announced earlier this month.

Weigh in on the Payback Playbook Prototypes starting April 28

Read more about this announcement on the CFPB website.