The FDIC, FRB, and OCC have released a joint statement rejecting industry requests for leniency regarding the cost of private student loan modifications, at the same time clarifying that modifications for distressed private student loan borrowers fall under safe-and-sound lending practices and banks will therefore not be criticized by the agencies for engaging in these arrangements if they are “prudent.” As a result, loan modifications, perhaps including principal forgiveness, will become a more frequent aspect of this market because a possible regulatory defense banks have mustered against calls for increased loan modification has been removed even as the cost of doing so remains high.

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