The CFPB published a report on Wednesday that reveals how student loan debt can hinder a consumer’s financial life and provides public input-based options for lawmakers to consider in order to help borrowers manage student loan debt.
“College can open up many opportunities, and we do not want that college degree to become more of a burden than a blessing for those saddled with unmanageable debt in a tough employment market,” CFPB Director Richard Cordray said. “Today’s report warns of the potential domino effects on the economy of high student debt. It also identifies policy and market-based solutions based on the public’s comments that would help borrowers manage their private student loan burden.”
In February, the CFPB issued a notice and request for information regarding input on affordable repayment options for student loan borrowers, which garnered more than 28,000 comments and suggestions that were made available online and in a searchable database.
The report found that the first-time homebuyers’ heavy student loan debt could hurt their ability to obtain a mortgage or save for a down payment. Student loan debt could also limit consumers’ access to small business loans and render them unable to save for retirement.
“Recent research revealed that only half of workers under 30 have enrolled in their employer’s 401(k) plan, and barely 40 percent contribute enough to receive a full employer match,” the CFPB report said.
Additionally, borrowers burdened with heavy student loan debt who live in rural areas could struggle to obtain a car—a prerequisite for many employment positions—and housing may be scarce.
The report included a number of suggestions and solutions provided by the public and submitted to the CFPB, including refinance options for borrowers who consistently pay on time, a “road to recovery” process where monthly payments are lowered to match the debt-to-income ratio and a “credit clean slate” for borrowers in default.