Hi, I’m Rohit Chopra of the Consumer Financial Protection Bureau. Ask me anything.

This is a little servicey to start, but I know all the tricks about student loans. Are you figuring out how to repay loans? Have no idea how to deal with all the jargon and fine print? I do. Consider me a sort of advice mallard, if you will.

You might be here because we, collectively, owe more than $1.1 trillion in student loans (yikes).

Usually I give reports and recommendations to congress about student loans. Today, I’m talking to reddit.

Never heard of CFPB? We’re a fairly new federal agency that regulates a lot of different consumer financial products, including private student loans. The Bureau was created in 2010, and we spent the next year setting up under the leadership of Treasury Secretary Geithner and Elizabeth Warren, who was then Special Assistant to the President for the CFPB. Since July 2011, we’ve been doing it on our own.

VERIFICATION: https://twitter.com/CFPB/status/332866448466788352

I’ll answer questions starting at noon eastern.

EDIT: If we didn't get to your question, or if you're coming here after it's over, check out www.consumerfinance.gov for more resources.

Comments: 239 • Responses: 23  • Date: 

b6passat48 karma

Do you think that the dramatic increase in student loans has contributed significantly to tuition inflation over the last decade?

cfpb10 karma

The evidence is a little mixed on this. I don’t think it’s just tuition that’s the cause of the recent run-up in student debt. Before the financial crisis, many families just had more savings to devote toward college. But when people lost jobs, the equity in their homes, and saw big losses in their retirement plans, that meant more costs were shifted to students themselves.

TouchDownBurrito12 karma

Does the agency you work for have any plans on trying to implement tuition control and close loopholes in existing laws? Correct me if I am wrong but the way I understand it colleges and universities are unable to raise "tuition" or they loose federal funding so instead they raise "fees" as sort of a loophole to get around this. From the start of my higher education to the end, 2007-2012, the part of my bill labeled tuition was never raised a cent yet every year there was a 8-10% increase in fees. Any plans on closing this sort of loophole?

cfpb20 karma

To be frank, no, we don’t. The Consumer Financial Protection Bureau has jurisdiction over financial products and services. That means we look at lending, servicing, debt collection, credit reporting, and things like that. Of course, the cost of college impacts lending, but other policymakers are focused on those questions. Right now, one of my biggest concerns is about borrowers dealing with big monthly student loan payments today, since many of them feel it’s a roadblock to future opportunity. If student loan borrowers aren’t able to buy homes and cars, start businesses, and save for retirement, that could spell trouble for all of us.

harperpitt24 karma

Why are student loans exempt from bankruptcy?

Most other things exempt from bankruptcy are child support, court-imposed fines, etc. -- stuff that we have a "moral imperative" to pay. What's the rationale for student loans falling under this category? Is there any chance this could change in the future?

cfpb18 karma

The CFPB published a report to Congress on private student loans and we looked at the data on the changes to the bankruptcy law in 2005. You’d actually expect that the unusual bankruptcy treatment would make prices go down, but the data we looked at didn’t show that. We recommended that Congress take another look at this and see if the current system makes sense.
On federal loans, there’s the Income-Based Repayment option, check this out: http://www.consumerfinance.gov/askcfpb/633/what-income-based-repayment-ibr.html. This doesn’t require any court filings or fees, but it can give you an affordable payment plan.

Yinanony17 karma

I am so frustrated with my student loan situation. I am out of school and have been working in the Higher Education field myself for over 15 years. I consolidated my student loans on the advice of my FA officer back in college. Now - I am NOT ELIGIBLE for any of the programs that can help pay the student loans off early. I live from pay check to pay check. Its my student loans @ 8% that are killing me and my past decision to consolidate was the nail on the coffin. Why aren't people in my situation being helped? What is there for us - the working stiffs that are stuck with high loans at high interest rates? The ones already working and paying taxes? And thanks for making yourself available to answer questions. :)

cfpb11 karma

I hear you. There’s so much focus on how to prevent problems for the next generation of borrowers, but for people struggling with loans today, it feels like the wrong conversation to have. This past week, we put out a report to policymakers that talks about the need for refinance options so people can take advantage of today’s historically low interest rates.

It sounds like you might have taken out a private consolidation loan that isn’t eligible for income-based repayment and other flexible repayment options, like on federal student loans. We’re working on finding ways to make sure private student loans can be more affordable. So many people have a tough time renegotiating payments with private lenders and servicers. I think banks, consumers, and the economy more broadly might be better off if people had affordable payment options.

blueocean199915 karma

Why are private loans given the same protection as federal loans? What can be done to phase out private loans?

cfpb4 karma

I just want to make sure I understand what you mean here. Can you say more?

blueocean199923 karma

Private loans are protected from bancruptcy the same as federal loans and can collect through garnishig. Yet, they can charge much higher interest rates. Should this be changed? Perhaps lower interest rates as a trade off for the protection from bankruptcy? Second part: is there any movement to let students consolidate private loans into a federal loan? I'd much prefer the GOVT profiting from my debt than Sallie.

cfpb2 karma

Thanks for clarifying -- while the bankruptcy standard is similar, federal loan debt collection tools are much tougher compared to private loans. Private loan debt collectors cannot garnish wages without a court order. And part of the reason private loan rates are higher is that many government loans are subsidized. On the second part, we discuss the pros and cons of this on page 17 of this report: http://files.consumerfinance.gov/f/201305_cfpb_rfi-report_student-loans.pdf

metropolisprime14 karma

Will the dramatic rate of student loan default cause major issues on the US economy? Who is on the hook for those payments (besides the students, of course)? How does the government plan to protect our economy against massive student default?

cfpb4 karma

So, if defaults increase on student loans, it won’t have the same impact as when lots of people couldn’t pay their mortgages. (Basically, the government has extraordinary tools to make sure it gets paid back, like taking your tax refund away if you default.) But it could lead to a drag on the economy if people aren’t able to spend and invest.

Abbreviated10 karma

Are you going to look into external factors affecting student debt? To be more concise,

What's the deal with textbooks costing as much as a class

Secondly, what's the deal with college tuition hikes yearly + the fact that there's more administrators in higher eduction than teachers?

Anyways, as a student, I wish you the best of luck!

cfpb8 karma

We certainly think about that, and a lot of other policymakers are looking at it too. To be honest, our biggest concern is about the millions of borrowers who are trying to manage their existing debt. I’m concerned that they can’t easily refinance or get affordable payments on their private loans, and that it may have a broader impact on the economy.

Thanks for your question -- I wish you the best of luck.

longinglook778 karma


cfpb11 karma

Yes, college is worth it. College graduates earn more and have much lower unemployment rates than those without. But borrowing big can have consequences. I think all of the talk about big student debt burdens is gonna make more students think about whether their college is giving them a good deal.

KatieCups15 karma

I remember my high school history teacher telling me that she will be paying off her student debt until her kids go to school, and then then she will be paying off of theirs. Sometimes it seems like taking loans to get an education to get a job in order to pay off your school loans then your kids for the rest of your life MIGHT not be worth it.

porcupineschool1 karma

The problem is how low teacher salaries are.

KatieCups12 karma

It's not just teacher salaries. I work in a non profit hospice and am now in the same boat as she was/is.

cfpb14 karma

Hey Katie -- have you checked out Public Service Loan Forgiveness?. It could possibly help with the situation you're describing.

kjb278 karma

Just want to say thank you for making yourself available to questions. No particular questions from me for now, but as someone who is paying off her undergrad loan debt, which is probably the biggest factor prohibiting me from starting the grad school process, I'm looking forward to this AMA!

cfpb9 karma

Thank you for being here, too! It isn’t just starting grad school. We hear that student loan debt might be twisting all sorts of decisions people are making. It’s making some people delay buying a home, saving for retirement, and starting a small business. Makes a lot of us worry about the broader impact on the economy. I actually wrote an op-ed about this yesterday.

EDIT: Fixed the link

mdhamilton3 karma

The link to your op-ed didn't work. Can you repost?

cfpb3 karma

Thanks for catching that!

Ppitm16 karma

considering HECS debt in Australia (students pay based on their salary) is no where near the cluster fuck that is student loans in the US would the system be a viable option for the US in the near future?

cfpb7 karma

On most federal student loans, you can actually repay using “income-based repayment” which lets you cap your loan payments as a percentage of your income. More people need to know about this program. We’ve got a simple introduction to it here.

wiseones5 karma

I took the "exit counseling survey" on http://www.nslds.ed.gov/nslds_SA/ and I think I'm actually more confused about my loans now than I was before I took it. Is anything being done to streamline/simplify this system?

cfpb9 karma

We work a lot with the Department of Education and schools on making these tools work better. Financial aid can be so complex and confusing. One of the things we did was work on a one-page “financial aid shopping sheet.” Already, over 700 schools have agreed to use this one-page format that makes it easy to compare and understand your loan options.

But if you’re already dealing with debt, check out this tool we’ve built.

wiseones3 karma

Hey! That's great - thanks so much!

cfpb3 karma

Sure! Let me know if you have ideas of how to make it better.

Serule5 karma

I have a student loan I have been paying on since December of 2011. Will my interest rates go up in July? This is the first I have heard about all of this. If the bill Senator Warren proposed passes will my interest rates go down?

cfpb7 karma

If you have an existing federal student loan with a fixed rate, your rate won’t go up in July. The talk about interest rate changes that you hear a lot about applies to people taking out new federal subsidized loans. That’s a point of confusion for a lot of people, so I want to be really clear on that.

washufize3 karma

My wife and I have been paying her loans for about a year now. Thankfully, I don't have any. I believe since we are using the standard repayment, we have about 9 years left.

Is it worth it to take out a home equity loan to pay back her loans, as I would likely be able to get a slightly cheaper interest rate?

We're currently getting (I think) the maximum tax credit on our tax return. Is it worth it to pay more than the minimums when this is the case? Also, if we were to refi by using a home equity loan, I assume we would give up the tax benefit?

Thanks for doing this AMA!

cfpb4 karma

Sure -- thanks for participating.

This is a tough question. The risk of taking on a home equity loan is that if you run into trouble, you could lose your home, which may be much worse than defaulting on your student loan. I’d need to know more specifics about your situation, but if you have really good credit, you itemize deductions on your taxes, you have a very stable job, and you have emergency savings, a home equity loan may be worth it.

It’s pretty frustrating to lots of student loan borrowers that they can’t refinance their loans and take advantage of today’s historically low interest rates. It’s something we’ve been working on.

cfpb2 karma

I've got to take off, but thanks to everyone for the great questions! All of our resources I mentioned today are available on consumerfinance.gov.

LordFluffy2 karma

Currently, I have a student loans that I got around 1994-1995 (went to college for 1 year) and then had no way to pay back, so I defaulted on them. I was able to begin paying on them almost a decade later, but by that point, they had doubled from interest. Right now, just shy of half my payment goes to interest.

I'm still paying on them and am getting them down, but are there any avenues open for forgiveness at this point? Other options? And if not, if I choose to go back to school, how bad does this hurt my chances of getting financial aid again?

cfpb3 karma

First, are they federal or private loans?

LordFluffy2 karma

Federal ones.

cfpb2 karma

If you have federal loans, you might have some options to keep your payments affordable and potentially enroll in some forgiveness programs. Check this out: http://www.consumerfinance.gov/paying-for-college/repay-student-debt

uniquee12 karma

I owe over 40k in student loans in the next years of my life..I am at a loss hoenstly on how to pay that efficiently and properly..I have heard about loan forgiveness and such things..are there any loop holes to get my totals down a bit? Is there anything I can do in order to get rid of some? What do you recommend on how to pay..ive heard of pay interest loans off first or pay the small accts off first etc.

thanks for your time.

cfpb2 karma

Thanks for your question. It really depends if you have federal loans or private loans. You have a lot more options on federal loans. Check this out on the CFPB website.

Herbz32 karma

I was very lucky and got a job right out of school and was able to pay off my loans (~26,000) in about a year. I was just curious, what is the average amount of loan debt and how long does it take for people to pay it off?

cfpb5 karma

I think the national average for graduating seniors is around what you had (about $26,000). Most loans have payment plans that last ten years, but obviously if you go back to school and defer, it will take longer. A reminder to everyone that there are no prepayment penalties anymore on student loans, so you can always make extra payments to pay it off quicker.

A lot of people like paying loans off quickly, but this isn’t always the best answer. You want to be sure you have cash stashed away for future goals, like buying a home or starting a family. It’s a personal choice.