CFPB Report Lays Bare Private Student Loan Market
CFPB warns about massive student debt (photo: Kyle James / wikimedia)
The Consumer Financial Protection Bureau has delivered a report to the Senate Banking Committee on the rise of the private student loan industry. This industry took a hit after 2010, when the Affordable Care Act included a provision that ended the practice of private banks administering student loans guaranteed by the government, and just had the government issue the loans themselves. Private student debt origination grew from $5 billion in 2001 to $20 billion in 2008, but after the 2010 law, the market contracted to under $6 billion. The recession and tightening credit standards also had something to do with that.But those loans from 2001 to 2008 are still out there, for the most part, particularly from the 2005-2007 period. And just like in the housing bubble, this period was characterized by reduced underwriting standards and a kind of “subprime” market. Increasingly, banks lent directly to the student, rather than through a college or university