Senate confirms new CFPB director who believes government 'must do more to cancel student debt'
New CFPB Director Rohit Chopra has spoken extensively about student loan forgiveness and higher education reform
New CFPB director Rohit Chopra has spoken extensively about his stance on student loan forgiveness and higher education reform. Here's how your student loans may be impacted by his confirmation. (iStock)
The Senate confirmed Rohit Chopra as the new Director of the Consumer Financial Protection Bureau (CFPB) by a vote of 50-48 on Thursday.
Chopra has led the Federal Trade Commission (FTC) since 2018, where he has taken a clear stance on the "devastating impact of student loan debt." He criticized the federal government for enabling financial institutions to "aggressively pursue borrowers by slamming their credit, levying hefty fees, and even humiliating them with their employer through wage garnishments," according to a 2019 testimony to Congress.
"There is a growing body of research and evidence that student loan distress is weighing on the economy… I fear there will be continued consequences if we fail to act."
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This won't be Chopra's first role serving the CFPB. He formerly served as an assistant director, where he led an agency serving student loan borrowers. In a 2014 CFPB testimony, Chopra said that student loan debt creates a "domino effect" on the greater economy because it skews labor market outcomes and keeps borrowers from buying homes and cars, starting businesses and even saving for retirement.
"If we still believe that going to college and working hard can help an individual climb the economic ladder, we have to wake up to the realities of our broken student loan debt collection system and fix it."
Chopra also served as special adviser to the secretary of education, where he "saw firsthand how much influence and power that Wall Street and government contractors like Navient have over our student loan system."
Keep reading to learn more about the new CFPB director and how his appointment may impact future student loan debt forgiveness measures. Also, consider your alternatives to student loan cancellation, such as income-driven repayment and private student loan refinancing.
If you decide to refinance your private student loans, be sure to compare offers across multiple lenders to ensure you're getting the lowest possible interest rate for your situation. You can compare student loan rates without impacting your credit score on Credible.
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The likelihood of student loan debt cancellation
Chopra says he believes that the secretary of education has "clear authority to act" when it comes to renegotiating student loan debt under existing law, saying that "the Department of Education must do more to cancel student debt."
But just because the new CFPB director believes in forgiving student loan debt doesn't mean it will make it easier for the government to do so. Widespread student loan forgiveness measures have proven difficult to implement despite ongoing pressure from progressive lawmakers like Senate Majority Leader Chuck Schumer (D-N.Y.) and Senator Elizabeth Warren (D-Mass.).
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Will Biden forgive student loans?
While President Joe Biden campaigned on canceling up to $10,000 worth of student loan debt per borrower, it's not clear whether his administration will make good on this promise. Biden has previously said that he doesn't want to use his executive authority to cancel federal student loans, instead leaning on Congress to work together to pass legislation.
Student loan forgiveness is an unpopular agenda among GOP lawmakers, though, so it will be challenging for Democrats and Republicans to come to an agreement on how to handle the $1.7 trillion student debt burden.
While widespread student loan forgiveness still feels out of reach, the Education Department has forgiven $9.5 billion worth of federal student loan debt since President Biden took office under programs like borrower defense to repayment, total and permanent disability discharges (TPD), closed school discharges and Public Service Loan Forgiveness (PSLF).
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How to pay off student loans if you don't qualify for forgiveness
Student loan forgiveness seems out-of-reach even for borrowers who believe they qualify. For example, 98% of PSLF applications have been rejected since the program's inception, leading to controversy over eligibility requirements. Plus, federal forgiveness programs don't apply to all types of loans, including private student loans.
Besides trying to get your student loan debt discharged, there are several other ways to manage student loan debt.
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Make more than the minimum payment
Making extra payments toward your student loans each month is an easy way to pay off your college debt faster and save money on interest. If you have room in your budget, try to increase your monthly student loan payments to reap the financial rewards.
You can use Credible's student loan payment calculator to see how making more than the minimum student loan payment can impact the cost of borrowing over time.
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Refinance your private student loans to a lower rate
Student loan refinancing is when you take out a new loan with better terms to repay your current loans. By refinancing to a lower rate, you may be able to lower your monthly payments, pay off your debt faster and save money on interest over time.
It may also be possible to lock in a lower interest rate on your federal student loans. However, refinancing would make you ineligible for federal protections like income-driven repayment, student loan forgiveness programs and COVID-19 administrative forbearance.
Refinancing rates are still hovering near historic lows, according to data from Credible. You can browse student loan rates from real private lenders in the table below.
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Enroll in an income-driven repayment plan or hardship forbearance
If you're just trying to get by making the minimum payments on your federal student loans, consider taking advantage of federal benefits like income-driven repayment (IDR) and forbearance.
IDR plans limit your monthly student loan payment to about 10-20% of your discretionary income, depending on the type of student loans you have. You can apply on the Federal Student Aid (FSA) website.
Federal student loan payments are currently in administrative forbearance, but the "final extension" is only valid through January 2022. If you still can't afford your federal loan payments after that, consider applying for economic hardship deferment or unemployment deferment on the FSA website. If approved, you may qualify for an additional forbearance period of up to 36 months.
You may also be able to enroll in a forbearance program for your private student loans, but eligibility requirements and the length of the payment pause vary by lender.
To learn more about managing your student loan debt, including student loan refinancing, get in touch with an experienced loan officer at Credible.
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