Agencies Say Lenders Need to Work With Student Borrowers

Three federal agencies that regulate banks have issued a joint statement telling lenders they should “work constructively” with borrowers who are having trouble paying back private student loans. The agencies—the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency—say that “prudent workout arrangements” are usually in the best interests of both borrowers and lenders, “even if the restructured loans result in adverse credit classifications or
troubled debt restructurings in accordance with accounting requirements under generally
accepted accounting principles.” The statement adds that lenders should provide clear information about what options are available to borrowers who are facing difficulties.

Student loan borrowers who are unemployed or underemployed may face hardship in making payments on their private student loan debts after separation from school or during periods of economic difficulty. Current interagency guidance permits prudent workout and modification programs for retail loans, including student loans, and provides that extensions, deferrals, renewals, and rewrites may be used to help borrowers overcome temporary financial difficulties.

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