The CFPB recently revised the prototype student loan Payback Playbook disclosures it has been developing with the Departments of Education and Treasury. These revisions were based on feedback from nearly 3,500 individual student loan borrowers, student loan market participants, higher education policy experts and other stakeholders in response to the April 2016 Notice and Request for Information Regarding Student Loan Borrower Communications. The CFPB also sent a letter to the Department of Education summarizing the revisions, feedback and the findings of an independent research firm retained by the CFPB to perform user testing on the Prototype Playbook.
The Payback Playbook disclosures are designed to be issued by student loan servicers to borrowers in order to help borrowers secure a monthly payment they can afford, thus mitigating delinquencies and defaults. There are two versions of the Payback Playbook: a General Playbook and an “At-Risk” Playbook. The General Playbook displays a side-by-side comparison of a borrower’s current repayment plan and two alternative plans, one of which is an income-driven-repayment option personalized to reflect the borrower’s current financial circumstances. The “At-Risk” Playbook is a “streamlined disclosure” targeted to borrowers with an increased risk of default, such as borrowers who are delinquent or otherwise demonstrate characteristics that suggest an increased likelihood of economic hardship. This disclosure identifies the borrower’s current repayment plan and also features a single income-driven-repayment option. The revised disclosures are available here.
The original student loan Payback Playbook prototype disclosures were released in April 2016 and the public was able to provide comments until June 12, 2016. Based on the comments received, and testing by an independent research firm, the CFPB made five general observations that informed its revisions to the Playback Playbook disclosures:
(1) Actionable Information: The disclosures need to contain information that will drive borrowers to take specific action (e.g., to contact their servicer or visit studentloans.gov to switch plans or to get more information) without providing too much detail, which could overwhelm borrowers and deter them from reviewing the document or taking further action. Accordingly, the disclosures are intended to reflect a “concept-driven, plain-language” approach rather than an attempt to offer exhaustive details and descriptions of costs and alternatives. The disclosures only present a limited selection of alternatives (i.e., one or two alternatives) that are tailored to be most appropriate for the individual borrower based on the borrower’s financial circumstances.
(2) Personalization: The CFPB favors an approach that would require servicers to utilize consumer tax data provided by the Department of Treasury and Internal Revenue Service to personalize the disclosures so they include estimated monthly payment amounts, repayment terms and other key information based on the consumer’s income and family size. These disclosures are to be estimates so as to not be misleading to the consumer.
(3) User-centered Visual Design: The feedback favored a “minimalist approach to presenting key information, bolded text, large font size, and the use of white space to draw consumers’ attention to relevant information.” Electronic disclosures might also have to use color to draw attention to important information.
(4) Adaptation to Specific Borrower Segments, Including At-Risk Borrowers: The CFPB noted that “at-risk” borrowers should be presented with language that clearly articulates the benefits and availability of a zero dollar income-driven-repayment payment. Specific disclosures might also be adopted for specific consumer segments such as public service workers and members of the military.
(5) Targeted Distribution: The CFPB recommended that the Department of Education conduct further evaluation to assess the effectiveness of distribution methods for these disclosures. Some of the comments indicated that it would be helpful to retrieve these disclosures in real time on a secure, borrower-facing portal and others indicated that it would be helpful to include these disclosures in regular periodic statements.
In its letter, the CFPB noted that it looks forward to receiving feedback from the Department of Education.