CBA Letter to House Committee on PROSPER Act

December 12, 2017


The Honorable Virginia Foxx


Committee on Education and the Workforce

United States House of Representatives

2176 Rayburn House Office Building

Washington, DC 20515


Dear Dr. Foxx,


The Consumer Bankers Association (CBA) is dedicated to helping students finance their higher education without overburdening their futures.  It is critical for higher education reform to promote policies that ensure the federal government responsibly serves those most in need and use the capabilities and expertise of the private sector to fully serve the marketplace.  The Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act (H.R. 4508) includes important reforms to federal student loan programs.  However, it also contains concerning provisions that expand the government’s role in student lending and increase tuition costs.  CBA is the voice of the retail banking industry whose products and services provide access to credit to millions of consumers and small businesses.  Our members operate in all 50 states, serve more than 150 million Americans and collectively hold two-thirds of the country’s total depository assets.  In addition, the CBA membership includes private sector lenders who make most private student loans to help families finance a college education. 


The State of Private Student Lending

Our members are proud of the services they provide to students and their families in the form of affordable financing that has helped millions access higher education.  Private student loans are performing extremely well, with 98% of borrowers repaying their loans on time.  This success rate is attributable to our members’ careful underwriting, which is arguably the best consumer protection of all. 


CBA members would like the opportunity to make more loans to America’s students, but they are kept to a tiny fraction of the market by the dominant federal Direct Loan Program.  Today, more than 90 percent of new loan originations are made by the federal government thanks to taxpayer subsidies and steering by the Department of Education.  Despite the uneven playing field, the private sector has slowly expanded in recent years, with innovative new products coming on line.  Unfortunately, we are concerned that the PROSPER Act as written will reverse this course by reducing private sector lending on net.


PROSPER Act Includes Several Needed Reforms

CBA greatly appreciates many features of the bill, which aim to better target federal lending and promote responsible lending.  CBA supports the bill’s elimination of Graduate PLUS loans and the creation of caps on Parent PLUS loans as much-needed reforms to the PLUS loan program. 


PLUS lending has expanded far beyond its original intent thanks to unlimited borrowing authority, contributing to the dramatic increase in the cost of higher education. 


We also appreciate the bill’s inclusion of better disclosures for borrowers, including the requirement that the annual percentage rate (APR) of federal loans be disclosed so that federal loan borrowers can understand the true cost of credit.  In addition, we support the modifications to the preferred lender list rules, including the elimination of the unworkable audit requirement.  Furthermore, we believe the simplification of the federal loan repayment plans is an important reform that will improve the performance of federal loans.


PROSPER Act Expands Federal Lending and Will Drive Up Tuition Costs

While CBA applauds several reforms included in this bill, we oppose the substantial increase in unsubsidized federal loan limits.  The new ONE Loan limits will increase federal unsubsidized lending by more than $10 billion a year, increase individual federal student loan burdens by up to $8,000 per borrower, and speed the rise of tuition costs.  This increase in federal lending will crowd-out private lenders from markets they serve today and counteract the effects of the needed reforms to the PLUS program. According to one analysis by a CBA member, the overall impact of the bill will reduce private lending annually by up to 16 percent.  Further constraining the private sector’s role will deprive the overall student loan market of the many benefits associated with responsibly underwritten private education loans.   


While the higher ONE Loans loan limits were reportedly an attempt to solve for the elimination of the needs-based Perkins program, these loans would be available to all students and families regardless of income.  By failing to target federal loan programs to those who need them most, the PROSPER Act will exacerbate the crowding-out of private market forces and allow tuition to continue increasing faster than inflation.  Replacing a small, needs-based loan program like Perkins with an expansion of the $1.4 trillion and growing federal student loan portfolio for all borrowers regardless of need is not sound conservative policy.  For these reasons, CBA strongly supports the retention of today’s unsubsidized loan limits.


Thank you for the opportunity to comment on this higher education reform bill.  CBA would welcome the chance to work with you in improving this important legislation that is so essential to our nation’s future.




Richard Hunt

President and CEO

Consumer Bankers Association