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Financial Services Law Insights and Observations

CFPB studies how borrowers transition out of student loan debt

Federal Issues CFPB Research Student Lending Consumer Finance

Federal Issues

On June 29, the CFPB released a new Data Point report from the Office of Research titled, “Final Student Loan Payments and Broader Household Borrowing,” which examines how student borrowers transition out of their student loan debt and repayment patterns are interconnected with general household finances. Among other things, the report found (i) 94 percent of final payments exceed the scheduled payment, and the median final payment made is 55 times larger than the scheduled payment; (ii) student borrowers who pay off loans early are 31 percent more likely to take out their first mortgage in the year following the student loan payoff than in the previous year; and (iii) student borrowers who pay off loans on schedule are likely to use new monthly savings to pay down other debts. The CFPB’s findings suggest (i) the timing of student loan payoffs may be determined by life events such as increases in wealth and household formations, and (ii) continuing to study student loan payoffs may help predict the evolution of the student loan market.

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