Students Call for Passage of Financial Reform Legislation in the Senate with Stronger Consumer Financial Protection Bureau

The United States Student Association (USSA), representing over four million college and university students nationwide, applauds Senator Chris Dodd, Representative Barney Frank, and all those who having worked diligently on the historic Wall Street Reform and Consumer Protection Act.  Members of Congress have recognized the importance of including regulation over private loans, the ‘wild west’ of student lending, in their efforts to stabilize the nation’s financial framework.

Unprecedented divestment from higher education has forced a third of students to borrow loans to pay for college, leading to nearly $25,000 of debt for the average graduate borrower.  Private lenders have taken advantage of this situation by imposing rigid repayment plans and excessive and arbitrary interest rate hikes on students.  The Consumer Financial Protection Bureau’s (CFPB) authority over all private student loans is a giant step in the right direction.  USSA further commends the private student loan ombudsman, which will drastically improve the student loan system through assistants to borrowers and constructive policy analysis.

In addition to these provisions, USSA calls for CFBP regulatory power over banks making under $10 billion.  Without this authority, Sallie Mae Bank, the largest private loan lender in the nation, will escape from under the watchful eye of the CFPB.  During the recent student aid reform debates, lending practices by Sallie Mae and banks like it were brought to light that demand more rigorous federal regulation.  It would be counterintuitive to end the Federal Family Education Loan program, due in large part to the lending practices of Sallie Mae, only to then remove Sallie Mae bank from CFPB oversight.

Additionally, USSA calls for a reinstatement of the House of Representative’s provision requiring students be made aware of any federal loans for which they are eligible before taking out private loans.  Nearly two-thirds of undergraduates who borrowed private loans in the 2007-08 academic year did so despite being eligible for lower-cost federal loans, and one quarter of these students did not take out any federal loans at all.  More awareness of federal loan eligibility is essential for effective college affordability legislation.

Not since President Roosevelt’s New Deal has Congress undertook such an ambitious and important reform of our nation’s financial system.  Instrumental in that reform is the protection of consumers against unscrupulous lenders, something that each student has a vested interest in.  During the Independence Day recess, students are taking action in-district on this legislation, letting their senators know why financial reform is critical to college affordability.  USSA urges the Senate to swiftly pass the Wall Street Reform and Consumer Protection Act with a strengthened CFPB.