CBA Supports Bipartisan Bill to Improve Federal Student Loan Disclosures

June 28, 2019

CBA Supports Bipartisan Bill to Improve Federal Student Loan Disclosures

90 percent of voters believe borrowers should receive disclosures detailing specific costs and terms before taking out an education loan


WASHINGTON – The Consumer Bankers Association today wrote Sens. Tim Scott (R-S.C.) and Joe Manchin (D-W.V.) to support their Student Loan Disclosure Modernization Act. The bipartisan bill would require federal student loans, which currently account for about 90 percent of student loans originated each year, to carry plain-language disclosures on the true cost of the loan. Private student loans offered by banks already contain these disclosures. These private loan disclosures help account for the 98 percent repayment rate of private student loans by ensuring borrowers fully understand monthly repayments, interest rates and the full cost of a loan prior to origination.


A copy of CBA’s letter of support is available here.


“For many students and families, a college education will be one of the most important – and expensive – investments they make,” CBA President and CEO Richard Hunt said. “Unfortunately, federal student loans do not carry a consumer-friendly disclosure like student loans offered by banks. Ensuring students and their families know the true cost of their loan will help them make better long-term decisions and set them up for success after graduation instead of trapping them in a debt trap set by opaque federal disclosures.


“This bipartisan legislation is a good first step in helping ensure borrowers have the information necessary to make informed decisions about financing higher education.”


The current so-called Plain Language Disclosure on federal loans is six pages of legal jargon in fine print and shows only generic loan costs and repayment terms.  The Scott-Manchin legislation streamlines the disclosure to clearly explain the costs and terms of the federal student loan specific to the individual borrower.  Private student lenders already offer their customers a clear, know-before-you-owe disclosure form.


A recent CBA poll of 1,000 registered voters echoed the importance of borrower disclosures as 90 percent of those surveyed felt borrowers should receive disclosures detailing costs and terms before taking out an education loan. More than 90 percent felt such disclosures should always provide specific monthly payment amounts.


The New York Federal Reserve has found every dollar of federal aid can lead to tuition hikes of up to 63 cents. Helping borrowers understand the cost of their federal loan will promote informed decision-making and discourage the over borrowing that is fueling the high cost of college.


In addition to implementing “Know Before You Owe” disclosures to clearly explain the terms of federal loans, CBA has recommended the following measures:

  • Increasing the availability of Pell Grants;
  • Ending unlimited PLUS loan borrowing to help reduce tuition increases;
  • Renaming 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 economist-preferred fair value accounting to show the true cost of federal student loans; and
  • Requiring detailed public reports on the performance of the federal government’s direct loan portfolio.


Learn more about CBA’s poll on voters attitudes about student loans and student loan recommendations here:




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.