July 26, 2013
JOHNSON COMMENDS FINANCIAL REGULATORS' EFFORTS ON PRIVATE STUDENT LOANS
WASHINGTON – Senate Banking Committee Chairman Tim Johnson (D-SD) praised the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency for their efforts to encourage financial institutions to work with private student borrowers experiencing financial difficulties. In a press release, the regulators provided guidance on how lenders can proceed with workout arrangements that benefit both borrowers and lenders in the long run.
“At a Banking Committee hearing last month, I urged the regulators to be vigilant in monitoring growth in the private student loan market and called on them to provide guidance tailored to private student lending, so I appreciate their immediate attention to this issue,” said Johnson. “This is a welcome first step, but more needs to be done. Nearly one million private student loans are in default, and while federal loans offer flexible relief during periods of hardship, most private student lenders do not offer the same options for struggling graduates. Last week, the Consumer Financial Protection Bureau announced that total outstanding student debt is now $1.2 trillion, with securitizations of private student loans on the rise. I encourage the regulators to continue monitoring emerging risks in this market and to provide effective supervision over private student lenders.”
The announcement by the Fed, FDIC and OCC follows a June 25th Senate Banking Committee hearing titled “Private Student Loans: Regulatory Perspectives.” At the hearing, Chairman Johnson asked the regulators to provide private student lenders with clear guidance regarding steps that can be taken to grant appropriate relief to struggling borrowers.
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