On the heels of recently released survey findings determining student loans should carry clear, plain-language disclosures about the total costs, the Consumer Bankers Association (CBA) is advocating lending transparency.
“The federal government holds around $1.4 trillion in student loans, making the Department of Education the fifth largest bank in the country, and is currently seeing a double-digit delinquency and default rate,” Richard Hunt, CBA president and CEO, said. “The government absolutely has a role to play in helping low-to-moderate-income students achieve their higher education goals, but it must be done in a responsible manner which does not set up families for failure by offering virtually uncapped loans with little disclosures.”
Officials said the CBA survey results revealed 90 percent of 1,000 respondents 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; and more than 85 percent indicated loans should offer borrowers an array of options such as fixed/variable interest rates, various lengths of time to repay and multiple repayment options.
“It’s disconcerting to see the public is largely in the dark about the true drivers and impact of what should accurately be called the federal student loan debt crisis,” Hunt said. “However, we’re greatly encouraged by American voters’ unequivocal support for the federal government to adopt basic fair-lending practices that are standard among private lenders.”
CBA has supported the bicameral Transparency in Student Lending Act recently introduced by U.S. Sen. Mike Enzi (R-WY) and U.S. Rep. John Curtis (R-UT) and the bipartisan Student Loan Disclosure Modernization Act introduced by U.S. Reps. Emanuel Cleaver, II (D-MO) and Jim Banks (R-IN).