CBA Statement on Latest Student Debt Resolution
CBA Statement on Latest Student Debt Resolution
WASHINGTON – Consumer Bankers Association President and CEO Richard Hunt issued the following statement after Senate Democrats proposed eliminating $50,000 of student debt without a serious attempt to bring about fundamental, long-lasting reforms aimed at lowering college tuition:
“Focusing on after-the-fact student loan debt alone is a temporary patch which ignores the underlying problem – the skyrocketing cost of college fueled by two decades of federal overlending.
“Every dollar of federal lending has been shown to have a direct correlation to increases in tuition. Without reigning in runaway lending from the Department of Education, which holds and originates enough student loans to be the fifth largest bank in the country, future borrowers will continue to accumulate mountains of debt.
“The majority of Americans struggling to repay their student loans - about 90 percent from the federal government - did not graduate but have debt without the advanced earning potential of a degree. Simply forgiving debt for graduates with the largest loans will likely help those earning the highest wages. Any serious proposal must go beyond debt forgiveness alone, which does nothing to solve the root cause of skyrocketing college tuitions.”
NOTE: Over the last two decades the price of college has increased nearly 200 percent and the amount of student loan debt held by Americans has gone up with it – from just over $600 billion in 2008 to nearly $1.5 trillion today. About 92 percent of that debt is from the federal government. These federal loans have a double-digit delinquency and default rate and lack plain-language disclosures on the total costs of the loan. Private student loans from banks, on the other hand, have a 98 percent repayment rate, offer clear disclosures at the start of the loan process and set borrowers up for success.
To help ensure the federal government responsibly serves those most in need while also fully using the capabilities and expertise of the private sector to serve the marketplace, CBA has recommended the following measures:
- Increasing the availability of Pell Grants;
- Ending unlimited PLUS loan borrowing to help reduce tuition increases;
- Implementing “Know Before You Owe” disclosures to clearly explain the terms of federal loans;
- Renaming so-called “Award” letters provided by colleges to the more accurate “Financing” letters and having them clearly differentiate loans from grants and scholarships;
- Requiring school certification of private education loans;
- Utilizing economist-preferred fair value accounting to show the true cost of federal student loans; and
- Requiring detailed public reports on the performance of the federal government’s direct loan portfolio.
More information on CBA’s student lending work is available here.
About the Consumer Bankers Association:
The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on Twitter @consumerbankers.
