With its first-ever director in place, a new federal consumer watchdog agency needs to take strong action in 2012 to educate the public about private student loans and clamp down on questionable practices in the sector, experts say.
President Obama in January named Richard Cordray to head the Consumer Financial Protection Bureau, or CFPB, despite Republican opposition. The Senate had failed to act on Cordray's nomination, prompting the president to install his choice through a short-term recess appointment made when Congress was not in session.
The bureau is a lightning rod for many conservatives, who argue that it will hamstring business in a challenging economy. Many Republicans have called either for terminating the agency or having it overseen by a board rather than a presidential appointee.
With Cordray in place, however, the bureau formally can launch efforts to oversee private student loans, or loans students obtain from private companies rather than the federal government. When it created the CFPB in 2010, Congress also authorized a private student loan ombudsman to study the sector.
But the administration couldn't fill the ombudsman job until it first installed a CFPB director, said Mark Kantrowitz of finaid.org, which studies the financial aid sector.
"With the appointment of a director, the floodgates have been opened," he told Diverse.
Given the partisan bickering about CFPB - and Republican threats to dismantle it - Kantrowitz said the agency needs to take decisive action this year to show its value to consumers.
With Republicans controlling the House of Representatives and Democrats in charge of the Senate, bureau opponents cannot get the votes to dismantle the agency this year, he said. But the picture is uncertain after that, depending on results of the fall 2012 elections for the White House and Congress.
The CFPB "will want to demonstrate their clear value. They'll want to hit some homeruns," Kantrowitz said - and private student loans could be near the top of their list.
He said the bureau should have three priorities on student loans: financial literacy for students and families; data collection on the extent of private loan use; and enforcement actions against predatory lenders.
Growing in popularity with increasing tuition, private student loans often carry interest akin to credit cards with borrowing rates of up to 18 percent, said The Institute for College Access and Success, or TICAS.
African- Americans are …