CFPB Investigating Tuition Payment Plans and Practices of School-Based Lenders
September 14, 2023
The Consumer Financial Protection Bureau (CFPB) is looking into, and warning students about, the risks faced by students when entering into agreements with colleges for tuition payment plans.
The regulator has released a report focused on these plans and the practices of school-based lenders. It will also continue gathering and analyzing information on these topics, and invites students who encounter issues with financial products or services related to tuition payment plans to submit complaints, the CFPB said in a Thursday (Sept. 14) press release.
Many of these plans lack consistent disclosures and have confusing repayment terms, putting students at risk of missing payments, incurring late fees and accumulating debt, according to the press release.
Some schools partner with third-party service providers to facilitate these plans, acting as lenders themselves, the release said. Although these plans are typically interest-free, they often include enrollment fees, returned payment fees and late fees.
These additional fees, when added to the tuition balance, can result in a high cost of credit, per the release. In some cases, students may face annual percentage rates as high as 237%, particularly when the borrowed amount is relatively low and the enrollment fee is significantly high.
