By Katanga Johnson

WASHINGTON (Reuters) – The U.S. Consumer Financial Protection Bureau (CFPB) will begin reviewing for-profit colleges’ internal private loan program as it steps up scrutiny of the student loan industry under its new Democratic leadership, a the agency announced on Thursday.

CFPB examiners will examine loan origination and servicing, focusing on colleges that are unduly expediting payments, failing to issue refunds, or restricting class enrollment or withholding student transcripts in debt, he said.

The CFPB currently oversees private student loans from outside lenders, but the new policy would see it review internal college private loan programs for the first time.

The new policy could expose colleges to potential enforcement action if the CFPB uncovers wrongdoing.

It comes as President Joe Biden’s Democratic administration aims to get the nation’s student loan crisis under control and step up scrutiny of private loan providers, as well as address inequities in Americans’ access to education. Higher Education.

“Schools that offer students loans to attend their courses have a lot of power over their students’ education and financial future,” said CFPB director Rohit Chopra. “It is time to open the books on institutional student loans to ensure that all students with private student loans are not harmed by illegal practices.”

Historically, schools have not been subject to the same service and origination oversight as traditional lenders.

The CFPB says its concerns are based on past abuses in the mid-2000s, where schools charged struggling students exorbitant interest rates and later armed them with debt collection practices, it said. added.

(Reporting by Katanga Johnson in Washington; Editing by Michelle Price and David Gregorio)