Speaking for the college students of US, one needs to offer a few advices to the Consumer Financial Protection Bureau (CFPB), just as it gets ready for its much anticipated launch this Thursday.
It is well known how many of us do not have the necessary know-how to make informed monetary decisions. It is the same story whether you talk about credit management or budgeting resources. Given the lack of information within this demography, lenders sometimes take undue advantages. Here are three ways in which CFPB can shelter the young Americans.
1. Clearly state income requirements for students holding cards
The 2009 CARD Act distinctly emphasizes that banks or lending institutions cannot forward credits to those who have not reached the age of 21. Exceptions can be made in cases where they have a guarantor or a cosigner to attest their cases. Only other exception should be made in cases where they possess an independent means of repayment. Unfortunately, lenders do not often throw light on the phrase “independent means” while making loan transactions with students.
They bend the clause as per their convenience and suggest student loan income to be enough as a source of repayment. At that point in time, lenders do not for once assume that student loan income happens to be a form of debt. Ideally, students should show a pay slip or an income verification proof prior to being provided the loans. It is needless to say that commercial greed has stifled any such requirement.
2. Make budget worksheet preparation mandatory for all federal student loan borrowers
As a student, you may lack perspective on your future budget. After all, how can students capably determine how they will be faring after their graduation? A few insights only come with time, don’t they? Unfortunately, financial budgeting is not one of them. If the students could assess how they would carry the yoke of student loan and pay them off after graduation, they could make better decisions. Sadly, this is not the case. Tidewater Community College in Virginia is looking forward for a novel incorporation.
Soon, they will ask the students to finish off two budget worksheets prior to applying for student loans. Each Federal loan applicant will have to clearly state how he or she will budget for the student loan repayments once they graduate. It is desired that this Tidewater Community College initiative becomes mandatory under law for all Federal student loan seekers.
3. Provide detailed information to aspiring borrowers
Transparency should be the key to all such discussions. As a borrower, you must have a right on information of all kinds. You must know the tenure of the loan, the interest rates, the monthly payment schedule and any other facet related to the loan.
While the Federal government ensures information for all those students who have undertaken the loan agreement, it would be prudent if the aspiring borrowers are allowed an insight into their future repayments. To extrapolate, the National Student Loan Data System should extend its tether and also become an information center for prospective borrowers. Ideally, the debt should not override about 10% of assigned monthly budget.
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