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Tuesday, May 20, 2014

CFPB Director Presents Student Loan Tool

At the Boulder Summer Conference on Consumer Financial Decision Making, CFPB Director Richard Cordray addressed student loans, the second largest debt category after the mortgage market, as one of the growing financial issues in our country. Because the “individual debt load from student loans has increased by 70% in less than a decade,” younger people are delaying large life purchases, such as their first mortgage. In the past, college educated young adults typically had higher incomes and therefore were more likely to buy a home. Cordray said:

Today, however, we are seeing more student loan borrowers shying away from making this investment. According to an analysis by the Federal Reserve Bank of New York, for the first time in at least a decade, households with student loan debt are less likely to have a mortgage than those without student loan debt.


In fact, Cordray continued, a recent Pew study showed that more than one third of people age 18 to 31 are living with their parents, an increase of nearly 18% since the start of the recession. This has contributed to a 15% decline in the homeownership rate among young people since its peak before the financial crisis. According to a survey by National Association of Realtors, 49% of Americans cited student loan debt as a “huge obstacle” to homeownership.

To help students understand how much debt they may have after graduation, the CFPB created the “Financial Aid Shopping Sheet”, a model that provides a uniform way to inform potential students of their true college costs before they commit to a school. This tool is part of the bureau’s set of tools titled “Paying for College”, which is modeled after the “Know Before You Owe” initiative.

Read the speech.

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