This story appeared in Bank Digest.
In an effort to find solutions for the troubled student loan market, the Banking Committee held a hearing June 25, 2013, to hear supervisory approaches and regulatory perspectives. The Consumer Financial Protection Bureau has estimated the size of the private student loan market to be about $150 billion as of year-end 2011. Since 2007, student debt has risen significantly, with student loans now second only to first mortgages as the largest category of consumer loans.
The regulators discussed their efforts to balance sound lending principles with appropriate measures to avoid default. They emphasized the importance of focused oversight to ensure that institutions participating in the private student loan market operate in a safe and sound manner and in compliance with applicable federal consumer protection laws. John C. Lyons, Office of the Comptroller of the Currency Senior Deputy Comptroller, noted that, although national banks and thrifts have a long history of participation in the private student loan market, they are not dominant players and their current portfolio holdings of private student loans represent just 3 percent of the total $966 billion in student loans outstanding.
Sallie Mae financing. In related action, Sen. Elizabeth Warren (D-Mass.) continued her press for answers regarding the use of credit from a Federal Home Loan Bank to support the private student loan business at Sallie Mae. Warren followed up her letter to FHFA Acting Director Ed DeMarco with a letter to Sallie Mae asking for clarification of the financing. She expressed concern that financing originally intended to support lenders offering families home mortgages is being offered to the largest provider of private education loans. Sallie Mae responded with a statement that its federal line of credit has "no bearing on our private education loans." According to Warren, this "appears to directly contradict language from the publicly-traded company's recent corporate filings."
• Elizabeth Warren (D-Mass.) release.
• Warren letter.
• Banking Committee Chairman Tim Johnson (D-S.D.) opening statement.
• Opening statement of Sen. Mike Crapo (R-Idaho).
• Testimony of Rohit Chopra, Student Loan Ombudsman, Consumer Financial Protection Bureau.
• Testimony of John C. Lyons, Senior Deputy Comptroller for Bank Supervisions Policy and Chief National Bank Examiner, Office of the Comptroller of the Currency.
• Statement of Todd Vermilyea, Senior Associate Director, Division of Banking Supervision and Regulation, Federal Reserve Board.
• Statement of Doreen R. Eberley, Director of Risk Management Supervision, Federal Deposit Insurance Corporation.