CBA Advocates For Higher Education Funding Reforms In New Letter To Congress

WASHINGTON – As the Administration and Congress evaluate proposals to address the nation’s federal student debt crisis, the Consumer Bankers Association supports improvements to federal higher education funding. In advance of Secretary Cardona’s Thursday testimony on Capitol Hill, CBA sent a letter to the House Committee on Education and Labor advocating for needed changes to federal student loan applications to empower students and families with the knowledge they need to make informed lending decisions when financing higher education.

Recognizing student loan debt now exceeds $1.7 trillion, with the federal government holding or guaranteeing almost 94% of that amount, Consumer Bankers Association President and CEO Richard Hunt highlighted in the letter the vast difference in outcomes between federal student loans and those held by private lenders, stating:

“The care and information that the private lending market provides ensures that borrowers are set up for success. 98% of private student loan borrowers are successfully repaying their loans, in stark contrast to less than half of federal borrowers pre-pandemic. […] Clearly any student loan crisis that exists sits squarely on federal government’s egregious over-lending practices that in any other context would be considered predatory.”

As opposed to student loans from the federal government, private lenders provide clear and digestible disclosure forms to borrowers at origination, one of the primary reasons they exhibit such success in repayment rates. While many in Washington have suggested solving the federal student loan crisis through forgiveness, Hunt believes policymakers should be addressing the root causes at the front end, adding:

“Rather than focusing on helping borrowers after they are already heavily in debt, policymakers should prioritize increasing accountability on institutions and create sensible safeguards to ensure sound financial decisions are made before students and parents take out student loans.”

In April, Hunt sent a letter to Senators Scott and Manchin, expressing CBA’s strong support for the bipartisan Student Loan Disclosure Modernization Act, which would help streamline disclosure requirements and clearly explain the costs and terms of the federal student loan specific to the individual borrower.

Americans overwhelmingly agree with disclosure requirements for federal loans, according to a January 2019 survey, which found:

• Fully 90 percent of respondents felt borrowers should receive disclosures detailing costs and terms before taking out an education loan.
• More than 90 percent of respondents felt such disclosures should always provide specific monthly payment amounts.

Read the full letter here. Learn more about CBA’s work to help students and families responsibly finance their higher education here.

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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.