Filling the Void: New CFPB Collection Could Help Protect Student Loan Borrowers

This post originally appeared on americanprogress.org 

By: Sara Garcia | April 26th, 2017

Every year, students borrow thousands of dollars each in federal student loans so they can attend college and increase their chances of upward mobility. To pay back those loans once they leave school, they need not only a decent income but also a helping hand to ensure that they understand their responsibilities and options during their years of repayment. Otherwise, student loan borrowers risk falling into default or delinquency, which can have lifetime financial repercussions.

That helping hand is supposed to come from a set of student loan servicing companies that receive millions of dollars from the federal government to work with borrowers to manage their debt and stay out of delinquency and default. These companies process payments, enroll borrowers in repayment plans, and are often the first line of contact for individual borrowers in distress.

Unfortunately, the amount of student loan debt in default across the country rose 14 percent in 2016, reaching a total balance of $137.4 billion in default. Such a sharp increase suggests real problems in the student loan servicing industry.

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