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Tracey Mills, tmills@cbanet.org, 703-276-3887

CBA Statement on President's Student Loan Plan

Plan is based on charging borrowers more than necessary and will lead to poor customer service

Arlington, VA-April 24, 2009. Responding to today's White House event at which President Obama promoted his plan for eliminating the Federal Family Education Loan program, today the Consumer Bankers Association urged policymakers to take a closer look at the proposal. Under the President's plan, no new FFEL program loans would be made after June 30, 2010.

CBA Director of Government Relations Marcia Z. Sullivan urged policymakers to closely examine the proposal before considering it: "The President's plan, although touted as a means of promoting higher education, is not. The plan does not reduce the cost of student loans for a single student. Students and parents need to know that under this proposal, the government's profits on student loans borrowed by middle income students will be used to finance other student aid."

Sullivan noted that CBA and its members support increasing grant assistance to schools. She noted, "Plentiful documentation of the value of higher education exists suggesting that an investment in the Pell Grant program pays for itself by leading to more college graduates who will earn more than $1 million more over their lifetimes than their peers who don't go to college. The increased taxes these students pay would more than cover the cost of increasing the maximum grant, as proposed by the President. It is simply not necessary to eliminate the FFEL program to increase Pell Grants."

CBA also disputed administration claims that eliminating the FFEL program would not result in poorer customer service to students and parents. More than 30,000 people are currently involved in helping students via the FFEL program. These experts understand students' loan obligations and how to get students the help they need when facing difficultly in repaying their loans. Firing them and hiring some untrained replacements, as the President proposes, would be a huge setback for educational opportunity."

CBA has called for Congress and the administration to convene a meeting of stakeholders including students, parents, consumer advocates, financial aid administrators, colleges, and loan providers to examine various proposals for change. "If we all get together and focus on what works best for students and also insist on full honesty on both the budget impact of changes and broader long-term implications of them, we can produce a program that works best for students, taxpayers and that will actually improve the loan experience for those who need to borrower to achieve their educational dreams."

CBA indicated it stood ready to be part of this dialog.

The Consumer Bankers Association is the recognized voice on retail banking issues in the nation's capital. Member institutions are the leaders in consumer financial services, including auto finance, home equity lending, card products, education loans, small business services, community development, investments, deposits and delivery.

CBA was founded in 1919 and provides leadership, education, research and federal representation on retail banking issues such as privacy, fair lending, and consumer protection legislation/regulation. CBA members include most of the nation's largest bank holding companies as well as regional and super community banks that collectively hold two-thirds of the industry's total assets.

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The Consumer Bankers Association is the recognized voice on retail banking issues in the nation’s capital. Founded in 1919, CBA provides leadership, education, research and federal representation on retail banking issues. For more information, please contact Marybeth Leongini, 703.276.3887 or mleongini@cbanet.org or visit www.cbanet.org.