Private lenders are pushing to break up the government’s near monopoly in the $100 billion-a-year student-loan market, The Wall Street Journal reports.
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.
Doing so would force many families to turn to private lenders to cover portions of their bills. While it could mean lower interest rates for some, it could also 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.
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.
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