The Student Loan Debacle Is a Fintech Problem

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The Student Loan Debacle Is a Fintech Problem

It was entirely predictable that the U.S. return to student loan repayments would turn out to be a giant botch. The COVID pandemic scarred huge portions of the American economy, exposing all manner of inefficiencies in the transfer of hundreds of billions of dollars between consumers, government and large financial institutions. There’s no doubt that suspending student loan repayments during the lockdown and for a few years later was a good and necessary step. But it’s been obvious since at least early 2023 that the nation’s financial and regulatory infrastructures were unprepared for the renewed onslaught of tens of millions of loan repayments. (In addition to the general problem of large-volume payments, there is a rich tradition of incompetence specific to the student loan industry and its government overseers.)

This week, the Consumer Financial Protection Bureau (CFPB) released an “issue spotlight” on the return to repayment; the CFPB document, while damning, is almost certainly the tip of an iceberg of boondoggle and illegality.