CBA Applauds Introduction of Student Loan Disclosure Modernization Act

Lauren Bianchi

CBA Applauds Introduction of Student Loan Disclosure Modernization Act

In letter to Senators Manchin and Scott, CBA touts bipartisan legislation as an important step in empowering borrowers to make informed decisions about financing higher education

WASHINGTON – As the Administration and Congress evaluate proposals to address the nation’s federal student debt crisis, the Consumer Bankers Association supports improvements to the federal higher education loan application, requiring them to carry plain-language disclosures on the true cost of the loan. CBA members represent the private sector lenders that make the majority of private education loans, and these loans already provide clear and digestible disclosure forms. By holding federal loans, which constitute more than 90% of higher education loans issued today, to the same standard as private lenders, students and families will have the resources they need to make informed decisions about their future. 

In a letter to Senator Tim Scott (R-SC) and Senator Joe Manchin (D-WV) Consumer Bankers Association President and CEO Richard Hunt wrote:

“Today, the ironically named Plain Language Disclosure provides users of federal student loan products six pages of legal jargon in fine print to show only generic loan costs and repayment terms. Your important legislation would streamline the disclosure and clearly explain the costs and terms of the federal student loan specific to the individual borrower.”

Recognizing the disparity between private and federal student loan disclosure forms, Hunt added:

“Private student lenders already offer their customers a clear, know-before-you-owe disclosure form that is welcomed by the borrower. CBA strongly believes that adequate, individualized disclosures of federal loan costs and terms will promote informed decision-making and discourage the excessive federal lending that is fueling the exorbitant rise in higher education costs.”

Americans strongly support increased 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.

Due in part to the lack of plain-language disclosures on the total costs of the loan, federal student loans have a double-digit delinquency and default rate. 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.

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.