ARLINGTON, Va.—NCUA, in partnership with the State Liaison Committee (SLC) of the Federal Financial Institutions Examination Council (FFIEC), announced new guidance for credit unions and banks on private student loans with graduated repayment terms at origination.

The guidance provides principles that should be considered in connection with policies and procedures for originating private student loans with graduated repayment terms.

SLC also noted that its partner agencies—NCUA, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency— recognize that the "competitive job market, traditionally low entry-level salaries, and higher student debt loads can contribute to some borrowers preferring greater flexibility with their payments as they transition into the labor market."

In addition, graduated repayment terms are structured to "provide for lower initial monthly payments that gradually increase."

SLC further stated that financial institutions that originate private student loans with graduated repayment terms "should prudently underwrite the loans in a manner consistent with safe and sound lending practices. " Finally, financial institutions should provide disclosures that "clearly communicate" the timing and the amount of payments to facilitate a borrower's understanding of the loan's terms and features, SLC added.

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