Banking and Finance Law Daily As student debt rises, CFPB looks to employer repayment benefits
Wednesday, August 16, 2017

As student debt rises, CFPB looks to employer repayment benefits

By Andrew A. Turner, J.D.

With nearly half of student loan borrowers leaving school owing at least $20,000, more employers are offering student loan repayment benefits to their employees, according to two new CFPB reports. "The Bureau’s research shows that people are taking on more student debt later in life, and having a tougher time paying it back," said CFPB Director Richard Cordray, as the CFPB offered recommendations to help companies that manage benefits programs ensure that borrowers receive the maximum value.

The CFPB Data Point: Student Loan Repayment study found that half of student loan borrowers are older than 34 when they start repayment, 30 percent of borrowers are not paying down their loan balances after five years in repayment, and more than 60 percent of borrowers not reducing their balances are delinquent. Increases in the share of borrowers in delinquency, especially among those with smaller loan amounts, suggest borrowers may not be accessing alternative repayment options—raising questions about the failure to take advantage of debt management options such as income-driven repayment plans.

An accompanying CFPB blog post observed that the benefits of affordable payment options remain largely untapped for borrowers "with lower balances, likely including many who have not completed their degree or certificate." This finding supports a need for further efforts to provide access to payment relief.

Employer repayment benefits. Highlights of the report on Innovation Highlights: Emerging Student Loan Repayment Assistance Programs include:

  • growing number of employers offer repayment assistance to employees with student debt;
  • student loan repayment assistance can save some borrowers hundreds or thousands of dollars, but borrowers in default may not have access to benefits offered under a typical employer program;
  • servicing problems can create roadblocks to providing and improving student loan repayment benefits; and
  • employers and benefits administrators can tailor programs to better meet employees’ needs.

According to the CFPB, "the challenges that consumers, third-party repayment assistance program providers, and program administrators face when initiating, transmitting, and processing third-party payments could reduce benefits intended for borrowers, potentially causing borrowers to miss out on the maximum value of such programs." The report concludes with a series of recommendations to student loan servicers, policymakers, and administrators of student loan repayment programs to address these concerns.

MainStory: TopStory CFPB Loans

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