Regulators Release Guidance on Private Student Loans with Graduated Repayment Terms

The Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the State Liaison Committee of the Federal Financial Institutions Examination Council (the "Regulators") issued joint guidance to provide financial institutions with principles applicable to private student loans that have graduated repayment terms.

In addition to encouraging financial institutions to underwrite the loans in a manner consistent with sound lending practices, the guidance provided principles with respect to private student loans with graduated repayment terms. These principles include:

• clear, defined repayment periods that are appropriately calibrated;
• loan terms should be based on reasonable assumptions about the ability to repay the borrower and cosigner;
• repayment terms should not be structured in a way that could mask delinquencies or defer losses;
• disclosures regarding compliance with all applicable laws and regulations should be provided to borrowers; and
• lender should contact borrowers before reset dates.

See: Guidance on Private Student Loans with Graduated Repayment Terms at Origination.