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5/8/13 - Student-Loan Servicing: Getting Ahead of a Possible Crisis

Student lending is the second-largest consumer-credit market in the United States. The growth of student-loan debt in recent years is often compared to the run-up in subprime mortgages in the years that preceded the global financial crisis. Sharp increases in delinquency rates for student loans have done little to discourage the comparison. This is precisely the type of market that the Consumer Financial Protection Bureau was created to regulate, which it took a step towards doing with a recent proposal to supervise larger participants in student-loan servicing.

The prospect of new supervision may be uncomfortable for student-loan servicers, many of whom have never faced federal supervision. Please click below to read a Sightlines InFocus by David Stein which argues that, difficult though the adjustment may be, bureau supervision presents student-loan servicers with the opportunity to reassess current practices and avoid repeating the mistakes of mortgage servicers.

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