Funding Higher Education & Student Lending Reforms


There is a role for both the federal government and private banks to play in helping students and their families responsibly finance higher education. The federal lending program, however, needs some common-sense reforms to constrain skyrocketing college tuition and help students better understand the amount of federal debt they are responsible for repaying – which are supported by Americans in a recent CBA poll.

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 $1.7 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.

It is clear there is a crisis – a federal student loan crisis.

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;
  • Restoring reasonable limits on PLUS loans to guarantee access while putting a brake on 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.

This is an important debate – one that has immense consequences for both student and their families – and getting it right should be required coursework for policymakers and regulators.

Watch to Learn More

Additional Resources

Regulatory & Legislative Comment Letters

  • CBA Writes Department of Education, CFPB on Improving Federal Student Loan Disclosures
  • CBA Letter to Senate HELP Committee on Higher Education Act Reauthorization
  • CBA Letter of Support for Student Loan Disclosure Modernization Act
  • CBA Letter of Support for Bicameral Student Loan Transparency Legislation
  • CBA Letter of Support for Bipartisan Bill to Improve Student Loan Disclosures 

Student Lending in the News