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Private Student Loan Servicing Guidance Issued

The Office of the Comptroller of the Currency (OCC) issued guidance in August about servicing private student loans, using extensions, deferrals, renewals and rewrites for closed-end loans and granting forbearance and deferments. OCC Bulletin 2000-20 PDF requires banks to charge off closed-end loans when they are 120 days past due and establish explicit standards that control the use of extensions, deferrals, renewals and rewrites.

The new guidance, specifically for private student lending by banks, recognizes that borrowers leaving school for the job market may not have enough funds to immediately begin repayment. It states that practices that defer the start of repayment must be well-controlled, supported and documented. Generally, this means it is acceptable to:


Otherwise, the guidance states that once repayment begins, private student loans should not be treated any differently from other consumer loans. A bank may temporarily or permanently reduce the interest rate for long-term hardships but delays in recognizing problem credit are generally not appropriate for long-term hardships. These delays include the following:


The guidance also states that the range of practices for working with distressed borrowers of federally-guaranteed loans (FFELP, DL Stafford and PLUS loans) is not appropriate for consumer loans.

Additional information on this guidance is available from the OCC letter PDF.