CBA Letter to Senate Banking: Private Student Loan Hearing

Dear Chairman Johnson and Ranking Member Crapo:
The Consumer Bankers Association (CBA) is Washington’s public policy leader for private student lenders and appreciates the opportunity to share some of our views with the Senate Banking Committee for its hearing entitled “Private Student Loans: A Regulatory Perspective.” CBA’s Education Funding Committee represents all the major bank participants in the private student loan business and is focused on promoting a private student loan market that is ethical, fair and reliable.
CBA and its member institutions recognize the value of higher education. During all economic periods, those with a college degree will have a better opportunity at securing a job and will have higher earnings than those without a college degree. A 2009 report by the U.S. Bureau of Labor Statistics (BLS) highlights lower unemployment for those with bachelor’s degrees. It points out higher earnings – “this amount is 1.8 times the average amount earned by those with only a high school diploma.”
Unfortunately, college tuition has risen 1,120 percent since 1978. This leaves many students and families with the difficult question of how to finance higher education. Families and students are covering the cost of higher education through grants, financial aid, scholarships, college savings plans and income. When these options do not cover the full cost of attendance, families and students then turn to loans.

The federal government is now originating 93 percent of today’s loans, but private lenders play a critical role in bridging the financing gap when aid, scholarships and Stafford loans do not meet a student’s needs. In fact, the 2012 Consumer Financial Protection Bureau (CFPB)/Department of Education joint report, “Private Student Loans” called these products “useful tools in the education finance toolkit”
We have seen an evolution in the private market. Today, most if not all, of the top private lenders offer fixed-rate products that are competitively priced and broadly available. Variable-rate products are also available at historically rates for those consumers who choose to take advantage of the benefits that variable rates can provide.

To read the full Comment Letter, download the PDF.