<img class="alignright size-full wp-image-14372" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/03/logo.png" alt="" width="262" height="66" />On January 18th, 2017, the Consumer Financial Protection Bureau (CFPB) <a href="http://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-nations-largest-student-loan-company-navient-failing-borrowers-every-stage-repayment/">filed suit</a> against Navient, the largest federal and private student loans servicer in the U.S., for “systemically and illegally failing borrowers at every stage of repayment.” Allegations include:
<ul>
 	<li>Misallocating student loan payments by failing to follow instructions from borrowers about how to apply their payments across their multiple loans.</li>
 	<li>Steering struggling borrowers toward multiple forbearances instead of lower payments via income-driven repayment plans. (Forbearance is an option that lets borrowers take a short break from making payments, but that still accrues interest.)</li>
 	<li>Providing unclear information about how to re-enroll in income-driven repayment plans.</li>
 	<li>Deceiving private student loan borrowers about requirements to release their co-signer (e.g. a parent or grandparent) from their loans, which can be advantageous given some lenders’ practices surrounding the death of a co-signer.</li>
 	<li>And failing to act when borrowers complained.</li>
</ul>
Navient currently services more than <a href="http://www.forbes.com/sites/zackfriedman/2017/01/20/navient/#612707b037c6">$300 billion in loans for more than 12 million borrowers</a>.

In a competitive workforce and a society that values higher education, students with a desire to advance themselves economically and professionally must borrow when they are unable to meet their education expenses with savings or current cash flows. In the U.S., student loans ballooned in 2016 to $<a href="https://www.wsj.com/articles/more-than-40-of-student-borrowers-arent-making-payments-1459971348">1.2 trillion</a>, with $56 billion in default.

One of the <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principles</a> promoted by the Smart Campaign is the prevention of over-indebtedness. In the developing countries where the Smart Campaign works, over-indebtedness can affect microfinance clients by causing them to work longer hours, reduce consumption, deplete savings, borrow to pay off current debt, sell assets, and deplete the assets of their relatives. Here in the United States, student borrowers may resort to many of the same strategies.

According to CFPB, Navient created obstacles to repayment by providing bad information, processing payments incorrectly, and ignoring borrowers’ complaints - illegally cheating many struggling borrowers out of their rights to lower payments. As a result of their actions, CFPB charges, Navient caused students to overpay for their loans, and harmed their credit scores, including those of disabled and veteran student borrowers.

Since its inception, the CFBP has recovered nearly <a href="http://chicago.suntimes.com/news/jesse-jackson-trumps-minion-prepares-to-gut-consumer-watchdog/">$12 billion for 27 million consumers</a> from lenders determined to have deceived borrowers, including vulnerable clients such as veterans and military families, students, seniors, people of color, and low-wage workers.

Though the Smart Campaign works mostly in developing countries, this suit highlights just how prevalent consumer protection problems are in all parts of the world, and importantly, how crucial it is to have advocates like the CFPB.

The Smart Campaign advocates full transparency in the pricing, terms, and conditions of all financial products. Lenders adhere to the Client Protection Principles by employing humane collection practices and high ethical standards in the treatment of clients. They give clients a way to address their complaints so they can be served more effectively. In essence, they ensure that clients receive services that are fair and respectful.

During his second week in office, the new President <a href="http://www.cnbc.com/2017/02/03/trump-signs-executive-order-on-financial-regulation.html">signed an executive order</a> directing the Treasury Secretary (still to be confirmed) to consult with regulators about potential reforms to the Dodd-Frank law which, among its many other provisions, created the CFPB. The Secretary’s report is due in the coming months. <a href="https://www.americanbanker.com/news/cfpbs-precarious-future-under-trump">Speculation is rife</a> that the administration will weaken the CFPB, for example, by <a href="http://fortune.com/2017/01/10/donald-trump-richard-cordray-consumer-financial-protection-bureau/">replacing its director</a>, and will propose more fundamental legislative changes to its charter. Keeping clients first and protecting vulnerable clients has been the business of the Smart Campaign, as it has of the CFPB. American financial consumers cannot afford to lose their chief advocate.

Have you read?

<a href="https://cfi-blog.org/2014/03/21/cfpb-gives-voice-to-clients/">CFPB Gives Voice to Clients</a>

<a href="https://cfi-blog.org/2014/01/22/cleaning-up-debt-collection-in-the-u-s/" target="_blank" rel="noopener">Cleaning Up Debt Collection in the U.S.</a>

<a href="https://cfi-blog.org/2016/09/19/wells-fargo-and-the-tuxedo/">Wells Fargo and the Tuxedo</a>

The U.S. Consumer Financial Protection Bureau and the Smart Campaign

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The Smart Campaign

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Over-indebtedness

Policy, Regulation and Government Initiatives

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&gt; Posted by Center Staff

It’s common knowledge in the United States that the student loan situation is bad and getting worse, but what are the actual statistics and how severe is this trend? Like other kinds of debt, student debt has innumerable implications for young borrowers, as well as for the country’s recovering economy.

<a href="http://education.newamerica.net/publications/policy/the_student_debt_review" target="_blank"><img class="alignright wp-image-14064" style="border:0;margin-top:5px;margin-bottom:5px" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/02/student-debt.png" width="250" /></a>A new report from the New America Foundation inspects undergraduate student loan debt data from the past ten years, compiling borrower rates and amounts, in aggregate and by institution and degree type. The report, <a href="http://education.newamerica.net/publications/policy/the_student_debt_review">The Student Debt Review</a>, draws from the National Postsecondary Student Aid Studies, a national survey series of student financial aid. Here are some of the report’s main findings:
<ul>
	<li>More students are indebted. Across all institution and degree types, the percentage of graduates with debt increased from 54 percent in 2004 to 62 percent in 2012. In 2004 there were 1.6 million graduates with debt. By 2012 there were 2.4 million.</li>
	<li>They owe more. Total student loan debt increased by an average of $3,300 between 2008 and 2012 after a period of four years in which it changed only marginally (2004-2008).</li>
	<li>For-profit colleges are a sore spot. Student debt is increasing especially quickly for bachelor’s degree recipients at private for-profit colleges, who now graduate with an average debt of $40,000 and pay $153 more each month than those graduating with bachelor’s degrees at public colleges. A very high proportion of the bachelor's degree graduates at private for-profit colleges have borrowed (87 percent), compared to public colleges (64 percent).</li>
</ul>
Average total debt for bachelor’s borrowers in 2012 was $29,400, and for associates and certificates graduates $17,200 and $13,300. The average annual income for Americans between 25 and 34 years of age is $37,532.

For more on student loan debt, read <a href="http://education.newamerica.net/publications/policy/the_student_debt_review">the New America Foundation report</a>.

Image credit: <a href="http://education.newamerica.net/sites/newamerica.net/files/policydocs/TheStudentDebtReview_2_18_14.pdf" target="_blank">New America Foundation</a>

Have you read?

<a href="http://cfi-blog.org/2012/10/01/lend-to-the-student-collect-from-the-professional/" target="_blank">Lend to the Student Collect from the Professional</a>

<a href="http://cfi-blog.org/2013/10/15/education-that-pays-for-itself/" target="_blank">Education That Pays for Itself</a>

<a href="http://cfi-blog.org/2011/10/20/1-trillion-in-the-red-what-can-debt-drowned-college-students-teach-mfis/" target="_blank">$1 Trillion+ in the Red: What Can Debt-Drowned College Students Teach MFIs?</a>

U.S. Student Loan Debt by the Numbers

Carmen Paraison

Education Finance

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The U.S. Consumer Financial Protection Bureau and the Smart Campaign

U.S. Student Loan Debt by the Numbers