The Associated Press November 16, 2011, 3:18PM ET

Consumer agency turns eye to private student loans

Private student loans are coming under federal scrutiny.

The Consumer Financial Protection Bureau, a federal agency that opened for business this summer, is asking the public for feedback on issues borrowers may run into with private student loans.

The information will be used to prepare a report to Congress on private student lending. The Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010 mandates the report, which is due by July 2012.

The agency said it will also use the information it collects to prioritize its regulatory work.

Raj Date, an official with the CFPB, noted in a statement that the private student loan market is one of the least understood in the consumer credit market.

"Shedding light on this industry will benefit students, lenders, and the market as a whole," Date said.

Private student loans are issued by banks and tend to have higher, variable interest rates than the loans issued by the U.S. Department of Education. They also do not come with the same guaranteed protections, such as deferment for unemployment or economic hardship.

The focus on private student loans comes at a time when student debt has become a growing concern. An analysis by The Project on Student Debt this month found that roughly two thirds of the class of 2010 borrowed for college. Among those students, the average debt upon graduation was $25,250. That's up 5 percent from the previous year.

To give feedback to the CFPB, consumers should go to www.consumerfinance.gov.

The Consumer Financial Protection Bureau, created as part of the financial overhaul law, polices the financial products marketed to consumers. But, lacking a confirmed director, the agency can't write or enforce new rules for nonbank financial companies.

President Barack Obama nominated former Ohio attorney general Richard Cordray to the post in July. But Senate Republicans have said they would oppose any nominee until the agency is revamped, partly by replacing the director position with a bipartisan commission.


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