Student Loans Essay

Improving the Administration and Collection Process for Government-Sponsored Student Loans

Today, tens of thousands of young people are mortgaging part of their future with student loans in order to obtain a higher education. In some cases, these students do not receive the full disclosure concerning repayment terms, creating a long-term hardship. To determine the facts, this paper provides an overview of government student loans and how the different actors on the student loan side are involved with helping the student borrowers with loans need to be held to a certain standard. The problem that is occurring is that the student loan representatives are not revealing repayment options or answering questions when students call. Therefore, the purpose of this study is two-fold as follows:  1) to demonstrate that there is in fact a duty for these actors to provide full disclosure due to controlling legislation and 2) to identify potential outcomes in the event student-borrowers file suit in response to these violations. These issues have assumed new importance and relevant today because the stakes are particularly high as college tuition costs are rising and students are taking on more debt, and in turn more risk.

Education loans are long-term funds that provide students and parents with the resources they need to pay for educational expenses. When people accept student loans, they are legally obligated to repay them according to the terms of the promissory note.2 Optimal loan arrangements for students and their parents are provided by Federal Direct Loans which are available irrespective of the amount of family income that is involved; but loans with the best terms are offered to students who are able to prove financial need.3  Generally speaking, federal loans provide students and their parents with superior terms compared to the majority of private or bank loans. For instance, the majority of loans from banks come with high interest rates and these loans do not contain the same provisions for deferment of payment that are provided by federal loans. By contrast, Federal Direct Loans can be deferred for repayment until borrowers are enrolled less than half time as undergraduates or graduate students.4 The U.S. Department of Education has a number of loan servicers that administer the student loans for the William D. Ford Federal Direct Loan (Direct Loan) Program as well as for loans that were completed originally pursuant to the Federal Family Education Loan (FFEL) Program but which are currently being serviced by the U.S. Department of Education.5

Despite the advantages of Federal Direct Loans, the Consumer Financial Protection Bureau (CFPB) has been encouraging lawmakers to revise the existing disclosure requirements of private student loan servicers to align their services with comparable reforms that have been implemented in the mortgage industry.6 In this context, disclosure has been recognized as an essential element of consumer protection policy in financial services. A salient example of these trends is the Truth in Lending Act (TILA) which was passed by Congress in 1968 that requires that lenders provide consumers with disclosures concerning rates and terms for mortgages, credit cards, and other types of consumer loans.7 A number of other laws also include consumer disclosures as a fundamental component of their provisions, including the Real Estate Settlement Procedures Act, the Consumer Leasing Act, the Electronic Fund Transfer Act, and the Truth in Savings Act.8 Over time, these laws have been amended and new requirements have been added. Indeed, recent federal legislation has required the revision or addition of disclosures through provisions of the Mortgage Disclosure Improvement Act, the Higher Education Opportunity Act, the Helping Families Save Their Homes Act, and the Credit Card Accountability Responsibility and Disclosure.9

Likewise, the U.S. Congress placed further emphasis on the centrality of providing American consumers with timely information concerning their financial transactions by passing the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 that established the independent Consumer Financial Protection Bureau (CFPB). The Dodd-Frank Wall Street Act stipulates that the majority of the disclosure and rulemaking responsibilities for consumer credit and deposit products that previously were the responsibility of the Federal Reserve Board and other federal agencies and other responsibilities for consumer protection in financial services were consolidated under the purview of the CFPB.10

Despite the fact that some type and level of disclosures are routinely provided by most financial services organizations, these initiatives have been important for improving the overall quality of such disclosures for a number of reasons. In this regard, Hogarth and Merry emphasize that, “While many financial service firms provide product information in the absence of mandatory disclosure requirements, the presence of these requirements imposes common standards of terminology, presentation, and calculation of relevant figures that can aid consumers in making comparisons between products and providers.”11 This approach is a far cry from the types of disclosure practices that existed in the United States in the early 1960s when disclosures for interest rates on consumer credit products were primarily controlled by state law, and a wide array of standards were used by lenders.12 This problem was addressed by the Truth in Lending Act by creating a common set of national disclosure standards concerning the respective costs of different types of loans. 

The CFPB has reported that students with private loans that are attempting to pay off or reduce their loan amounts are being deceived into paying higher fees with longer repayment terms that inevitably damage their credit ratings.13 The CFPB has expressed increasing concern over the increasing numbers of private student loans and their corresponding default rates. According to the editors of American Banker, “The CFPB -- which has made aggressive steps in 2013 to monitor the private student loan market -- recently said that there are 7 million student loan borrowers who have defaulted in a market with more than $1.2 trillion in outstanding student loan debt.”14 By any measure, $1.2 trillion represents an enormous investment in America’s future, but this future is threatened by the potential default of many students who find themselves unable to repay these loans when they come due.

Despite the fact that the majority of student loans continue to originate with the federal government, students who do assume responsibility for private loans are being placed at a disadvantage compared to federal loans because private loans are typically charged at higher and variable interest rates. In fact, the majority of the recent complaints from student borrowers have related to being manipulated by loan servicers in ways that bilk them out of even more money. For instance, the editors of American Banker point out that, “Many of the 3,800 private student loan complaints that the CFPB reviewed from October 2012 through September were related to payment processing issues, particularly when the borrower tried to pay off the debt early or set up a certain periodic payment structure but incurred a fee to do so.” 15 

The CFPB has also reported that borrowers with more than one student loan have been unable to pay additional amounts on the loan that carries the highest interest rate; rather, their payments have been distributed equally across all loans, thereby extending the loan repayment period.16     In reality, though, these practices are understandable because the longer students require to pay their loans off, the more money loan servicers will generate even though paying off a student loan as early as possible is in the best interest of borrowers. This practice represents a growing concern for policymakers because the provisions of the amended Truth in Lending Act of 2008 prohibit the imposition of penalties for the early repayment of private student loans.17 In other cases, students have been charged extra fees if they tried to modify or reduce their monthly payment arrangements, while in yet other cases their payments have been distributed among different loans in ways that cause them to be charged with other additional fees. In this regard, the editors of American Banker report that, “In certain cases, student loan servicers applied payments in such a way that struggling borrowers did not meet the minimum payment on multiple loans, incurring multiple late fees.”18

In order for students to make an informed judgment concerning their capability of repaying student loans in the future, they must be able to calculate their chances of actually finishing a degree program and they must be able to fully comprehend the terms of their loan repayment. Because student loans represent such a major investment in the future, it is vitally important for borrowers to receive full disclosure concerning the terms of repayment and any potential hidden charges that may be assessed.19 

Unfortunately, the CFPB confirms that loans continue to be made to students with minimal analysis of their potential ability to repay loans, and these loans are made without any cosigners to guarantee repayment. As the editors of American Banker conclude, “Unlike federal loans, there is often no safety net built into these loan programs, such as loan forbearance or modification rights for those who are unable to make payments after graduation.”20 Taken together, it is clear that the student loan process is fraught with loopholes and provisions that often place borrowers at a disadvantage as discussed further below.

Like automobile loans or home mortgages, federal student loans are authentic loans that must be paid back even in those cases where borrowers experience financial problems. Moreover, student loans cannot be forgiven if students fail to obtain the degree they were seeking (except in those cases where their failure to complete a degree program was because of school closure).21 Student loans can be forgiven, though, in those cases where students die or become permanently disabled. Otherwise, students must repay each of their loans pursuant to the repayment schedule provided by the Direct Loan Servicing Center. The grace period for deferred payment of student loans ranges from 10 to 25 years, depending on the total amount borrowed and the provisions of the repayment plan. Although plans are in place to provide students and their parents with the additional information they need to make an informed decision concerning loan amounts and repayment terms, borrowers at present are still at a disadvantage with respect to these issues.22 

At present, the law rules out loan forgiveness except under special circumstances such as death, permanent and total disability, bankruptcy (in some cases), school closure prior to completion of an educational program or entry into a designated public service career (the US Bankruptcy Code at 11 USC 523(a)(8) provides an exception to bankruptcy discharge for education loans)23 as set forth in Table 1 below.

Table 1. Types of student loan forgiveness, cancellation, and discharge
Type of Forgiveness, Cancellation, or Discharge Direct Loans Federal Family Education Loan (FFEL) Program Loans Perkins Loans Closed School Discharge x x x Total and Permanent Disability Discharge X X X Death Discharge X X X Discharge in Bankruptcy (in rare cases) X X X False Certification of Student Eligibility or Unauthorized Payment Discharge X X Unpaid Refund Discharge X X Teacher Loan Forgiveness X X Public Service Loan Forgiveness X Perkins Loan Cancellation and Discharge (includes Teacher Cancellation) X  

The purpose of 20 U.S. Code § 1091a - Statute of limitations, and State court judgments, are to provide assurances that student loans and grant overpayments are repaid irrespective of any federal or state statutory, regulatory, or administrative limitation on the period within which debts may be enforced.24 Moreover, Section b of 20 U.S. Code § 1091stipulates as follows:
Notwithstanding any provision of State law to the contrary—
    (1) a borrower who has defaulted on a loan made under this subchapter and part C of subchapter I of chapter 34 of title 42 shall be required to pay, in addition to other charges specified in this subchapter and part C of subchapter I of chapter 34 of title 42 reasonable collection costs;
    (2) in collecting any obligation arising from a loan made under part B of this subchapter, a guaranty agency or the Secretary shall not be subject to a defense raised by any borrower based on a claim of infancy; and
    (3) in collecting any obligation arising from a loan made under part D, an institution of higher education that has an agreement with the Secretary pursuant to section 1087cc (a) of this title shall not be subject to a defense raised by any borrower based on a claim of infancy.25    

Beyond the foregoing, the College Cost Reduction and Access Act of 2007 (P.L. 110-84, 9/27/2007) also included income-based repayment as an alternative within both the Direct Loan as well as the Federal Family Education Loan (FFEL) programs. According to Kantrowitz, “This repayment plan bases monthly loan payments on 15% of discretionary income, with discretionary income defined as the amount by which adjusted gross income exceeds 150% of the poverty line. After 25 years in repayment, the remaining amount owed is forgiven.”26  These arrangements provide lower monthly payments compared to the income-contingent repayment plan. In addition, the application of the poverty line at 150% as a threshold means that repayment plans are congruent with the same standards that are applied to bankruptcy fee waivers.27 According to Kantrowitz, though, “It should be noted that the US Supreme Court upheld the government's ability to collect defaulted student loans by offsetting Social Security disability and retirement benefits without a statute of limitations in Lockhart v US (04-881, December 2005).”28 

In Lockhart v. US, a portion of Lockhart’s Social Security payments were withheld beginning in 2002 to repay his federally reinsured student loans that had become overdue in excess of 10 years.29 In response, the petitioner filed suit, maintaining that the Social Security withholdings were barred by the 10-year statute of limitations pursuant to the Debt Collection Act of 1982, 31 U.S.C. §3716(e)(1). In addition, the Social Security Act generally exempts Social Security and other benefits from withholdings or other legal processes. In this regard, 42 U.S.C. §407(a) stipulates that “[n]o other provision of law … may be construed to … modify … this section except to the extent that it does so by express reference,” §407(b). Likewise, pursuant to 20 U.S.C. §1091a(a)(2)(D), the Higher Education Technical Amendments of 1991 eliminated time limitations on lawsuits that were targeted at collecting overdue student loans and in 1996, the Debt Collection Improvement Act made Social Security benefits subject to withholding “[n]otwithstanding [§407], 31 U.S.C. §3716(c)(3)(A)(i).” In response to the petitioner’s lawsuit, the District Court initially dismissed his complaint and the Ninth Circuit affirmed. The Supreme Court also held that the federal government is authorized to withhold Social Security benefits in order to collect a student loan debt that has been overdue for more than 10 years. 

In addition, the Court also held that:

* The Debt Collection Improvement Act makes Social Security benefits subject to offset, providing the sort of express reference that §407(b) says is necessary to supersede the anti-attachment provision.

* The Higher Education Technical Amendments remove the 10-year limit that would otherwise bar offsetting petitioner’s Social Security benefits to pay off his student loan debt. Debt collection by Social Security offset was not authorized until five years after this abrogation of time limits, but the plain meaning of the Higher Education Technical Amendments must be given effect even though Congress may not have foreseen all of its consequences, Union Bank v. Wolas, 502 U.S. 151, 158. Though the Higher Education Technical Amendments, unlike the Debt Collection Improvement Act, do not explicitly mention §407, an express reference is only required to authorize attachment in the first place.

* Though the Debt Collection Improvement Act retained the Debt Collection Act’s general 10-year bar on offset authority, the Higher Education Technical Amendments retain their effect as a limited exception to the Debt Collection Act time bar in the student loan context. The Court declines to read any meaning into a failed 2004 congressional effort to amend the latter Act to explicitly authorize offset of debts over 10 years old. See, e.g., United States v. Craft, 535 U.S. 274, 287.

Conversely, the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152, 3/30/2010) introduced a revised version of income-based repayments that reduces the monthly payment terms by one-third to 10% of discretionary income; this law also provides for the forgiveness of the remaining student debt after 20 years in repayment instead of 25 years effective July 1, 2014; however, students who have previous federal student loans as of June 30, 2014 are not eligible for these revised income-based repayment terms.30

To help reduce student loan default rates, the Consumer Financial Protection Bureau and the Department of Education have encouraged colleges and universities to employ a standardized model financial aid disclosure form that provides students with the ability to compare different loan rates and identify associated risks and costs of their student loans.31 In many cases, parents are confronted with a confusing array of loan terms and conditions to the extent that they opt for financing college expenses with credit cards which is far more expensive compared to student loans. Furthermore, students remain unable to accurately determine how much debt is appropriate for them because financial aid award letters fail to provide repayment estimates.32 In sum, students are faced with a bewildering array of rules and regulations that place them at a disadvantage during a critical period in their lives. In response to the current situation, a number of alternatives have been advanced, including those discussed below.

The Consumer Financial Protection Bureau's efforts to assist student borrowers who are struggling to repay their loans are laudable but limited in what they can achieve. According to the editors of American Banker, “The agency has solicited comments concerning how to assist student borrowers amid fears that the $1.1 trillion in outstanding student loan debt could prove to be the next financial crisis. Regulators and analysts have warned that many borrowers have minimal access to refinancing options.”33 The fundamental issue involved concerns the fact that a minimum of 85% of current outstanding student debt is in the form of federal loans and the CFPB lacks supervisory authority for these loans. Because the overwhelming majority of loan defaults are for federal loans, the CFPB remains limited in what it can accomplish in reforming existing student loan provisions. 

Despite these constraints, the CFPB could still achieve some important outcomes for students with outstanding loans. For instance, the editors of American Banker point out that, “Federal student loan borrowers often have access to alternative payment options -- including extended repayment plans and graduated repayment plans in which monthly payments can be temporarily lowered. Some, but not all, private lenders offer similar plans.” 34 In this regard, some private student loan repayment plans include comparable terms to their federal counterparts. The country’s largest private student loan lender, SLM Corporation, more commonly known as Sallie Mae, provides students with a 12-month rate reduction program, as well as lower interest rates and modified loan terms. In addition, Sallie Mae offers students a “good-faith catch-up payment program” that authorizes the temporary suspension of loan payments as well as the amortization of the loan principal.35 In addition, according to Price, federal policy should also enforce regulations that require full disclosure of the increased cost of the loan and obtain written consent from the borrower before lenders can capitalize the interest for students who continue to receive unsubsidized Stafford Loans.36 In addition, in those events where interest is capitalized on unsubsidized student loans, the additional interest charges should be subtracted from any default costs the government is required to pay on those loans.37 

Further, a growing number of analysts believe that federal higher education policy must take into account the enormous amount of debt that students are incurring to achieve an education, especially lower-income minority students who are the most likely to default on their loans due to an inability to repay.38 In this regard, Price suggests that, “One way to counter this growing problem is to cap educational debt repayment as a proportion of gross annual income and limit the loan repayment period. Over the past decade average cumulative undergraduate debt has almost doubled to $18,000.”39 The situation is even more drastic when students have pursued graduate degrees, and the total costs of loans for these students can exceed $100,00040 although the average amount of debt is approximately $17,000.41 Moreover, fully 20 percent of student loan borrowers are currently unable to repay their loans.42 Students can currently borrow up to $5,500 per year in Perkins Loans depending on financial need and other aid and up to $5,500 to $12,500 per year in Direct Subsidized Loans and Direct Unsubsidized Loans from the federal government.43 Complicating the problem of understanding the terms of these loans is the fact that at present, students only receive the full disclosure of the terms of their loans after the loans have been approved by the U.S. Department of Education.44

A report from the Association of Community College Trustees and The Institute for College Access & Success contains a number of useful strategies that can help reduce student loan default rates.45 The following strategies can be used to implement the report's key recommendations at educational institutions.
1. Embrace default reduction as a campus-wide endeavor. Conduct on-campus workshops to determine the level of awareness among student borrowers concerning their student loan rate, average loan rates and default rates at their institutions. According to Covino, “Too often, those at the workshop do not know these basics--but they should. The most successful default prevention programs involve awareness and support that goes beyond the financial aid office. Senior leadership should be on board, to hold everyone accountable for preventing default.”
2. Analyze who borrows and who defaults. The most common default prevention strategy has been a blanket approach, with the same level of counseling and contact provided to all borrowers in a cohort; however, that approach is inefficient because too many resources are committed to those borrowers who are likely to successfully repay their loans without intervention, but provide too few resources to those who are likely to struggle with repayment. A superior alternative is to adopt a targeted approach to default prevention, applying different levels of outreach based on a borrower's level of risk. Educators can also examine the National Student Loan Data System School Portfolio Report (SCHPR1) to determine patterns in borrowers' repayment behavior and characteristics of those most likely to default. Based on these findings, borrower outreach initiatives can be fine-tuned depending on the identified default risk. Organizations like USA Funds can assist with this analysis and even perform outreach campaigns if needed. 
3. Provide counseling and information to borrowers when they need it. USA Funds experiences better contact and counseling rates with borrowers early in the loan life cycle. Borrowers who have trouble repaying their student loans are more likely to respond to offers of help if lines of communication have been established during the grace period. 
4. Improve entrance and exit counseling. Supplementing required loan counseling with financial literacy and student success training is an effective way to keep students on track to complete their education with a minimum amount of debt. Surveys of students who have been exposed to the USA Funds Life Skills financial literacy curriculum find that nine out of 10 report making at least one positive change in their personal finance or academic behavior. The most successful financial education is offered as a requirement through multiple touch points that already are part of the typical student life cycle. Orientation, student success courses and residence hall programs are just a few of the many existing opportunities to incorporate this training. Delivering this training by trained peer mentors can be especially effective.46

Another potential solution could be to prevent the government from collecting student loans in those cases where their representatives failed to make full disclosure concerning loan repayment conditions or were unresponsive to borrowers’ inquiries and concerns. A recent executive memorandum issued by President Barack Obama that avoided the need for congressional action may provide some relief in this area. A press release from the White House reported that, “Obama's memorandum targets third parties such as Sallie Mae/Navient that contract with the government to collect on federal student debt. Those companies will be required to better inform borrowers about their repayment options and notify them when they are delinquent on payments.”47 

In addition, the Higher Education Opportunity Act of 2008 implemented a series of important changes that provide students and their families with additional information for private educational loans. The Higher Education Opportunity Act of 2008 changed the disclosure requirements for the Truth In Lending Act (“TILA”) for non Title IV education loans (including Federal Stafford, Federal Perkins, Federal PLUS and Federal Grad PLUS Loans) that are issued specifically for post-secondary education expenses. These regulations became effective on February 14, 2010 and require lenders to provide the disclosures to borrowers set forth in Table 2 below.

Table 2. Disclosures required by the Higher Education Opportunity Act of 2008

Regulation Provisions Application and Solicitation Disclosure (ASD) The lender must provide a general range of rates and fees so that borrowers can make informed decisions when choosing a private loan lender. The ASD provides general information about interest rates, fees, default or late payment costs and repayment terms. In addition, it includes an example of the total cost of a loan based on the maximum interest rate offered by a lender, a defined loan amount and calculations for each payment option. The ASD must also include eligibility requirements for the loan AND information on alternatives to private education loans. The ASD is intended to be a tool for the applicant to use in comparing loan offers. Lenders are required to mail the ASD within 3 days after a phone application is taken and they pull a credit report on the applicant. Loan Approval Disclosure (LAD) When an applicant is conditionally approved for a loan, the lender must send this disclosure with borrower-specific rates and fees. The LAD must be provided BEFORE the consummation of the loan on or with any notice to the applicant that the creditor has approved the consumer’s application for a loan. The LAD provides information SPECIFIC to the loan being approved by the lender, including detailed information on the interest rate, itemization of fees associated with the loan application (including fees associated with late payments and defaults) Lenders must also provide a statement on the alternatives to private education loans through the federal student financial assistance programs. Lenders must give an applicant 30 calendar days after the date on which the applicant receives the AD to decide to accept the offered private loan. Borrowers have 30 calendar days to accept the loan terms offered. The borrower can accept the terms of the loan by mail, phone or electronically. Final Disclosure This is sent to the borrower after the loan terms are accepted and the school has certified the student’s eligibility for the loan. The Final Disclosure gives the borrower a three-business-day right to cancel period. Private Education Loan Applicant Self-Certification In addition to these disclosures, a lender must obtain a signed and completed Private Education Loan Applicant Self-Certification form from the borrower. This form has been created by the Department of Education. The self certification form includes information about the availability of federal student loans, the student’s cost of attendance, estimated amount of financial assistance, and the difference between the student’s cost of attendance and estimated financial aid.

Source:  Financial Aid: Truth in Lending Act Information at http://tncc.edu/students/financial-information/financial-aid/financial-aid-truth-in-lending-act-information/:

It is possible for students and others with standing to file lawsuits in those cases where full disclosure is not made. For instance, on February 26, 2014, the CFPB filed a lawsuit against ITT Educational Services, Inc. for employing high pressure tactics to lure students into taking out expensive private student loans the company knew would likely end in default. A press release from CFPB reports that, “The CFPB alleges that ITT exploited its students and pushed them into high-cost private student loans that were very likely to end in default. The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.”48

The Federal Reserve Board has also studied ways to improve the type and level of disclosures that are made to borrowers seeking student loans. Pursuant to its regulatory development mandate, the Federal Reserve Board employed both quantitative and qualitative research methods under controlled conditions to develop new disclosures which were used to evaluate their effectiveness in improved the ability to improve borrowers’ understanding of a wide array of financial products and services with the objective to develop optimal disclosures that borrowers can better understand and to use this information in formulating financial decisions that are consistent with their individual financial condition. The following are key findings set forth in Table 3 below are from the Board’s testing of different disclosure approaches.

Table 3. Key Findings from Federal Reserve Board research concerning optimal disclosure approaches

Key Finding Description Disclosure language should be plain but meaningful. When reading disclosure documents, consumers are best served by terms that are straightforward. Small wording changes can significantly improve consumer understanding, but for some content, communicating the intended meaning may be difficult even with the use of plain language. Thoughtful design can make disclosures more usable. Carefully designed visual elements in disclosures, such as titles, headings, tables, charts, and typography can increase consumers' willingness to read disclosures and can aid their ability to navigate and understand them. In the case of privacy notices, consumers who saw a table that outlined the company's information-sharing practices and consumer rights related to those practices performed substantially better than those who saw the same content laid out in prose. In the course of the Federal Reserve credit card consumer testing project, presentations that separated fees and interest charges helped consumers understand these different elements in their bills; however, there was no difference in understanding between consumers who saw transactions grouped by type (purchases, cash advances, and balance transfers) and those who saw a chronological listing of transactions regardless of type. Contextual information can improve comprehension and usability. Context, or a "frame," for information on a disclosure can help readers understand both specific content in the disclosure as well as its overall message. It can also help consumers better comprehend how to use the information. When multiple items appear in each disclosure, consumers seek a whole-to-part way of organizing all the information put in front of them.31 Therefore, it is important to include contextual information that aids consumers in understanding the overall message of a disclosure document as well as the individual parts Achieving a neutral tone can be challenging. Although disclosures often strive for a neutral tone to avoid "steering" consumers in one direction over another, achieving neutrality is difficult. Some aspects of choice architecture are set by statute, and others may be left to the discretion of the agency with implementing authority. Within the framework set by statute, the goal for presentation of information may still be a disclosure that does not steer consumers, yet sometimes maintaining a neutral tone can be challenging for regulators. Creating disclosures may involve creating a choice structure. In some cases where choice options are not specified in the law, establishing the structure may be part of creating the disclosure. In cases where the choice options are not standardized by law, the Board may decide to use its authority to create a standard by regulation. The choice architecture of how options are presented can affect consumer decision-making. In addition, establishing this underlying structure may be a part of creating or improving a disclosure. Standardizing disclosure can be challenging. Standardization can be beneficial, but finding terms that are truly standard across all contexts can be difficult, and consumers may need to be alerted when a "standard term" has a different meaning than the one they may be familiar with. What works in print may not work online. Disclosure design needs to take into account the possibilities and limitations of alternative delivery channels. Changing the delivery channel for consumer disclosures may mean revising the format and being willing to modify content. In the case of web presentations of disclosures, the three-dimensional nature of the Internet can enable consumers to link to more detailed information, allowing for education on the product; however, getting consumers to notice and then click on key links can be as challenging as getting them to interact with the paper disclosure. Conventional wisdom has it that consumers will read hard-copy print but scan web pages, so web designers have learned to write for "scannability." There is growing evidence, though, that consumers are transferring their web page scanning techniques to print media. Thus, print disclosures are beginning to incorporate some of the elements of web page design--for example, grouping information, using graphics (boxes and bullets), and writing in "chunks" rather than prose “Less is more" often remains true. Too much information can overwhelm consumers or distract their attention from key content. For example, when redesigning the disclosure box for credit cards, the disclosures quickly became focused on rates and fees. Other information that had been in the box--for example, balance calculation methods--was moved to an area below the box. In the first three rounds of testing of disclosures, furthermore, many participants misunderstood the historical payment examples in the current application disclosure.41 Many participants did not realize that the example showed what payments on a $10,000 loan would have been under actual historical rates. Some thought the example showed a hypothetical future scenario of what might happen to rates and payments and did not see the example as useful because they did not think it provided any information about their loan. Others erroneously thought that the example showed their loan and that the payments would be their exact monthly payments. Even when the table was explained, participants who had originally misunderstood the example still did not think the information provided was useful.
Source:  Adapted from Jeanne M. Hogarth and Ellen A. Merry, Designing Disclosures to Inform Consumer Financial Decision-making: Lessons Learned from Consumer Testing, Federal Reserve Bulletin, 2 (August 2011).

Finally, when students are faced with problems in repaying their private of federal student loans, there are other steps they can take to avoid default. Students who are unable to negotiate with their loan servicers can contact various ombudsman programs that available to help them.49 Ombudsman programs provide objective representative who are tasked with informally collaborating in an confidential fashion between the stakeholders to identify an optimal solution. Borrowers with federal student loans can obtain assistance from the Federal Student Aid Ombudsman Group. As the legal advisors at Legal Consumer point out, “Prepare yourself to be persistent when working with the federal government to resolve a complaint about how your loans are handled. There is good evidence that Federal Student Aid failed to do enough to help with legitimate complaints.”50 In support of this assertion, Legal Consumer cites a number of administrative issues that can adversely affect timely student loan repayments, including:
* Lost or improperly credited payments;
* Loans that are mistakenly placed in default; 
* Loans that are sold to another servicer without borrowers’ knowledge; and,
*  Incorrect information in loan records.51
    In addition, borrowers with private student loans can contact the Consumer Financial Protection Bureau. As a last resort, borrowers can also retain an attorney to help them resolve loan repayment issues.