RSSSince 1990, the average price of college tuition has been increasing two to three times faster than the Consumer Price Index. According to the College Board, a public policy research organization focused on education issues, “Tuition and fees at public universities have surged almost 130 percent over the last 20 years—while middle class incomes have stagnated.” Tuition is also going to keep rising faster than inflation.
Peterson’s Guide to College estimates that four years at a private college can cost up to $100,000; the same degree from a state school could run $40,000 to $60,000. However, few students pay the full cost or “sticker price” of a college. That’s because most students receive some form of financial aid. And about two-thirds of students graduating with four-year degrees do so with loans hanging over their heads. Their average bill comes in at a whopping $23,186, according to FinAid.org.
The CFPB recently announced it is collecting information to create options for policymakers to make repayment of private student loans more manageable for these young borrowers. The instigator of this initiative was a recent report by the CFPB that indicated consumers had trouble negotiating affordable repayment plans with their lenders and servicers for private student loans. CFPB Director Richard Cordray stated: “Too many private student loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder.”
Unlike federal student loan borrowers, private student loan borrowers typically aren’t granted the long-term forbearance or income-based repayment options that are found with federal loan programs. The CFPB report further found that more than 850,000 loans are in default, representing more than $8 billion in private loan balances,
“The reality is that student loans are a part of most students’ college experience,” says Patrick Kandianis, co-four of SimpleTuition, a Boston-based company that provides free tips, advice, and interactive tools that help students save on college-related expenses by planning better for college cost and being smarter about how they manage and pay back student loans.
“And we believe that parents and students should look at not only the cost for the first year, but all four and in some cases five years, to make an informed decision about their financial options,” Kandianis says. “Likewise, the options for paying back student loans are confusing and can be overwhelming at times if we start to look at all the different loan types and payback options.”
One of SimpleTuition’s tools, PayBackSmarter.com was built to help alleviate pressures by allowing students to make informed decisions about managing their student loan debt. PayBackSmarter shows graduates how to find a student loan repayment plan that works for their personal financial situation, including lowering monthly payments, paying back loans quicker and consolidating federal loans.
As part of their initiative, the CFPB is asking financial institutions, consumers, educational institutions, students, families, and even housing experts to share insights about student loan repayment programs and their impact on a student’s financial future.
From the Notice and Request for Information, the CFPB will take the information collected and devise private loan repayment affordability recommendations to policymakers.
The Notice and Request for Information can be found at:
http://files.consumerfinance.gov/f/201302_cfpb_rfi_student_loan_affordability.pdf
