Federal watchdogs say they are keeping a close eye on potentially abusive practices by post-secondary institutions that make direct loans to their students.
These are typically private, for-profit institutions such as ITT, Corinthian Colleges and others, which have long had only scant oversight of its loan practices, in contrast with more traditional lenders such as banks and credit unions. Congress recently granted the bureau wider powers to curb student loan abuses.
In a news release last month, the Consumer Financial Protection Bureau said its examiners will now be looking at such practices as:
- Restricting students’ stability to enroll in or attend classes if they fall behind in their payments. This can delay their graduation and hurt their prospects for employment.
- Withholding student transcripts from students who are in debt to the school, leaving them unable to prove their level of education and how they have fared in classes.
- Improperly accelerating payment schedules of students who withdraw from school or demanding immediate payment in full.
- Failing to issue refunds that a borrower may be entitled to if they withdraw.
- Maintaining improper relationships with other lenders. Schools that have preferential relationships with certain lenders could potentially increase the cost of a student’s loan.
“Schools that offer students loans to attend their classes have a lot of power over their students’ education and financial future,” said CFPB Director Rohit Chopra. “It’s time to open up the books on institutional student lending to ensure all students with private student loans are not harmed by illegal practices.”
The consumer finance bureau will also examine more general lending issues by these institutions.
Student loan borrowers experiencing problems related to repaying student loans or debt collection can also submit a complaint to the watchdog agency.