An emerging practice of using education data to determine creditworthiness is drawing scrutiny on Capitol Hill, where Senate Democrats are questioning whether private student lenders are engaging in educational redlining by raising the price of credit for historically marginalized groups.
Lawmakers’ concerns center on lenders factoring in where borrowers attend college or what they study to assess the risk of extending credit and the appropriate interest to charge. Lenders say using a range of consumer information, including education, leads to higher approval rates and lower interest rates.
But Democratic Sens. Sherrod Brown (Ohio), Kamala Harris (Calif.) and Elizabeth Warren (Mass.) say these practices may have a disparate impact on minority groups and violate fair-lending laws. Now, they are calling on the Consumer Financial Protection Bureau (CFPB) to take action.
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