Warren further asked DeMarco to provide more details about the Sallie Mae credit line and lines of credit given to other lenders that “are substantially engaged in offering private loans to students.”

David Jeffers, executive vice president of policy and public affairs for the Council of Federal Home Loan Banks, said when FHLB membership was opened up to commercial banks and credit unions, the legislation was very specific in stating that the banks would provide members with funding to serve the needs of their communities, which includes housing but could also be used for other types of community development.

“Because the Federal Home Loan Banks are not a high-profile group of institutions, it's not unusual to make that mistake, based on our name alone,” he said of Warren's comments about the FHLB mission.

Approximately 500 credit unions participate in Sallie Mae's Smart Option Student Loan referral program.

The hearing featured regulators from the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Reserve and FDIC.

In his opening statement, Banking Committee Chairman Tim Johnson (D-S.D.) said the private student loan market is worth $150 billion, and private lenders allow many students to attend college who would not otherwise afford it and may sometimes offer better terms than federal loans.

“However, nearly one million borrowers are in default on their private student loans. And while federal loans offer flexible relief during periods of hardship, most private student lenders do not offer the same options for struggling graduates,” he said.

One issue raised during the hearing was the effect student loan debt has on other markets, such as the mortgage market. Sen. Jeff Merkley (D-Ore.) called student debt a new debtor's prison because college graduates are often unable to live independently because of their loan obligations.