Banks Look to Break Government’s Hold on Student-Loan Market

"Private lenders are pushing to break up the government’s near monopoly in the $100 billion-a-year student-loan market," according to The Wall Street Journal

"The banking industry’s main lobbying group, the Consumer Bankers Association, is pressing for the government to instate caps on how much individual graduate students and parents of undergraduates can borrow from the government to cover tuition.

That would force many families to turn to private lenders to cover portions of their bills. While that could mean lower interest rates for some, it could constrain funding to households with blemished credit histories.

A group of investors also is lobbying for legislation to provide a clearer legal framework for 'income-share agreements,' under which private investors provide money up front to cover tuition in exchange for a portion of a student’s income after school. Firmer rules would help spur more agreements, the group said.

At stake is potentially billions of dollars in new business for private lenders, a group currently dominated by SLM Corp. , better known as Sallie Mae, Wells Fargo & Co., and Discover Financial Services .

The U.S. Education Department makes about 90% of student loans annually—a market that totaled $107 billion in new originations in the most recent academic year, according to the College Board.

Private lenders pushed for legislative changes in previous years to no avail, but now they’re receiving a more welcome reception from congressional Republicans and the Trump administration.

House Republicans, looking to revamp higher-education policies for the first time in a decade, have included the industry’s proposals in a wide-ranging bill unveiled in November, which they hope to pass this year."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.



Publication Date: 3/8/2018

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