CBA on House Democrats’ Higher Education Proposal

July 25, 2018

CBA on House Democrats’ Higher Education Proposal

Legislation would lead to higher tuition, student debt


WASHINGTON – The Consumer Bankers Association today expressed concerns with the Higher Education Reform proposal announced by Democrats in the House of Representatives.


“There are some aspects of this plan we support, but taken as a whole this virtually unlimited source of federal lending, with very little regard for borrowers’ ability to repay, has driven up both college tuition and debt for students as well as their parents,” said CBA President and CEO Richard Hunt. “Instead of encouraging virtually unchecked borrowing from the federal government, adding to its troubled $1.4 trillion loan portfolio, Congress should focus its efforts to better target federal aid and reduce college costs.


“Private student loans are affordable options with low default rates for many students and families because of extensive underwriting and robust disclosures, which fully inform borrowers before they take out a loan. The federal government should encourage those who qualify to utilize the private market for education funding, freeing up federal funds to help those most in need.”


CBA endorses increasing Pell Grants, as called for in the legislation. Grants are the best way to provide access to higher education for low-income Americans.


Allowing unlimited PLUS loan borrowing by parents and graduate students, however, creates little incentive for colleges and universities to curtail tuition costs. In fact, just the opposite. The Federal Reserve Bank of New York found every dollar increase in federal loans adds between $0.25 and $0.63 to the price of tuition.


To 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 recommends:


  • Ending unlimited PLUS loan borrowing;
  • Improving federal “Know Before You Owe” disclosures;
  • Re-naming 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 fair value accounting to show the true cost of federal student loans; and
  • Requiring detailed public reports on performance of the federal government’s direct loan portfolio.



About the Consumer Bankers Association

The Consumer Bankers Association represents America’s retail banks above $10 billion in assets. We advance legislation and promote policies geared toward creating a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.6 million jobs in America, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans. Follow us on Twitter @consumerbankers.