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Modernizing Student Loan Credit Reporting

Student loan debt has been rising for many years by nearly all measures – including total loan debt balance and average debt amount at graduation. Student loan debt is the second largest debt in the U.S. exceeding aggregate debt from auto loans, credit cards, and home-equity debt balances.

Numerous players and institutions hold stakes at each level of the market, including federal and state governments, colleges and universities, financial institutions, students and their families, and numerous servicers and guarantee facilities. As part of these efforts, the Departments of Education and Treasury in Partnership with the Consumer Financial Protection Bureau (CFPB) have undertaken initiatives in an attempt to improve servicing practices.

In September 2015, the Departments of Education and Treasury along with the CFPB issued a Joint Statement of Principles on Student Loan Servicing. This statement laid the groundwork for future initiatives to strengthen servicing protections for borrowers and set forth the objective to ensure student loan servicing is, where appropriate:

  1. Consistent
  2. Accurate and Actionable
  3. Accountable; and
  4. Transparent.

Credit Reporting Impacts

While the objectives described above apply across many aspects of student loan servicing, one in particular stands out – credit reporting. To initiate these efforts, the agencies (Dept. of Education, Dept. of Treasury and CFPB) announced a joint effort in April 2016 and published a fact sheet outlining how they intended to “modernize” and standardize student loan credit reporting processes. While the fact sheet primarily focuses upon Direct Federal Loans and Federal Guaranteed Loans, the eventual guidance to be published as a result of these efforts will likely apply to all student loans (public and private).

As a financial services consulting firm that spends a significant amount of time in the credit bureau compliance and CFPB compliance exam preparation space, we anticipate this guidance will have a substantial impact on the student loan servicing industry. To help get ahead of these changes, we have conducted research and published the white paper, "Modernizing" Student Loan Credit Reporting: Insights into the Anticipated Guidance and Recommendations for Proactive Action.

While the guidance is not finalized, the insights in the white paper highlight situations where we expect the new guidance to have an impact – including specific fields that may be effected, which include but are not limited to:

  • Special Comment Code
  • Account Status Code
  • Account Type
  • Amount Past Due
  • Credit Limit
  • Current Balance

Download the full white paper to read more on the anticipated guidance related to student loan credit bureau reporting and to understand what steps you can take now to ensure compliance readiness.

Category: Compliance