House Higher Education Bill a Mixed Bag for Students, Families

December 4, 2017

Legislation includes several CBA supported provisions to help students, but federal loan expansion could increase college tuition costs

WASHINGTON, D.C. – The Consumer Bankers Association (CBA) thanked House Education and Workforce Committee Chair Virginia Foxx (R-NC) for her leadership in introducing the Higher Education Act reauthorization bill. The bill, introduced late Friday, contains several provisions CBA has championed as ways to help bring down student debt and college tuition costs as well as ensure student know the full APR of federal loans; however, the legislation also has provisions that could increase tuition and expand the federal government’s role in education lending.

“We would like to thank Chairwoman Foxx for her leadership and the Committee for working to tackle this important issue,” said CBA President and CEO Richard Hunt. “The federal government certainly has a role to play in helping families afford to send their children to college, but when research shows a direct connection between federal lending and increased tuition costs, that role needs to be closely examined. Expanding direct loan limits, as this bill proposes, will encourage colleges to increase prices, further expanding the trillion dollar federal loan portfolio.

“Private lenders are ready and willing to provide more capital to students and their families, but today are crowded out by government over-lending. We support an approach to allow students with means to access the private market while ensuring government subsidized loans are available for those most in need. This will benefit taxpayers and students alike.”

CBA supports a provision requiring federal loans to disclose the full APR so borrowers know the loan’s true costs. Private student loans currently include a full “know before you owe” disclosure.

CBA also supports the elimination of graduate PLUS loans and caps on parent loans as a check on college tuition costs by controlling colleges’ access to federal funds through student loans. There is a direct correlation between federal lending and the cost of college. A report by 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. According to the Wall Street Journal, at the end of 2016 borrowers collectively holding $137 billion in federal loans had failed to make a payment in more than nine months and more than 2 million were in default, a 17 percent increase from 2015, while the private market has a 98 percent repayment rate.

The bill, however, expands federal Stafford loan limits, which crowds out the private market and limits options for families. This increase is in despite of the fact the federal program has tripled in recent years to more than a trillion dollars in taxpayer backed loans.




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.