They haven’t tried anything, and they’re all out of ideas.
The Consumer Financial Protection Bureau, the government watchdog set up to monitor and remedy financial misdeeds that bedevil consumers, has issued a call for helpful ideas from the public and from financial experts regarding ways to lift the curse of student-loan debt that hangs over 38 million Americans to the tune of a trillion dollars.
“The Ombudsman seeks information in order to provide policymakers with further details on potential ways to increase payment affordability for private student loan borrowers in distress and on the risks of failing to do so,” the plea reads.
The deadline for submission of comments is April 8, 2013.
Mark Kantrowitz, a financial analyst, believes the main hurdle to reforming the broken student-loan system is frozen capital markets, which limit student options for refinancing their debt.
“The influx of capital will create competition that will expand options for borrowers,” Kantrowitz said.
Another roadblock to helping student borrowers get out from under the crushing burden comes with the unique nature of student debt itself: It can’t be discharged in bankruptcy. Kantrowitz says this should change.
“The exception to discharge for student loans should be repealed,” he said. “This not only will provide some direct relief to borrowers, but it will also cause lenders to offer more compromises rather than risk losing the loans.”
Unfortunately, making student debt more negotiable than a debt to a Brooklyn bookie “is not the primary subject of this Request for Information,” the CFPB says.
But Kantrowitz and the CFPB agree that students need to think long and hard before signing their master promissory notes.