Bipartisan Legislation Aims to Increase Transparency in Student Loans

Strategic Insights -

As college students return to school, many are overwhelmed by the interest piling up on their loans. To combat this, Sens. Chuck Grassley (R-Iowa) and Joni Ernst (R-Iowa) have reintroduced bipartisan legislation to provide more transparency to students and families before taking out a federal loan. The Student Transparency for Understanding Decisions in Education Net Terms (STUDENT) Act increases transparency by giving prospective students and families a clear estimate of the total amount of interest they would owe based on the outstanding principal of all the students' loans.

Key Takeaways:

  • The STUDENT Act requires the disclosure of the total interest amount that a student loan applicant would pay based on the applicable repayment plan.
  • The legislation makes the disclosure of the total interest amount required during or before an applicant takes out a loan.
  • The bill has additional cosponsors, including Sens. Amy Klobuchar (D-Minn.), Tim Kaine (D-Va.), and Maggie Hassan (D-N.H.).
  • The STUDENT Act aims to help students make more informed decisions about taking out loans and to empower them to succeed.
  • The legislation builds on other bills introduced by Grassley to provide students and their families with better information about the costs of college, including the Net Price Calculator Improvement Act and the Understanding the True Cost of College Act.
  • The Know Before You Owe Federal Student Loan Act is also mentioned, which makes counseling about the likely cost of loans compared to income an annual requirement before new student loans are disbursed.

Statistics:

  • 70-80% of students are not aware of the actual amount they will end up paying over the life of a loan (no specific source mentioned).
  • The Net Price Calculator Improvement Act aims to improve the effectiveness of and access to tools that provide students with early, individualized estimates of higher education costs and financial aid packages.
  • The Understanding the True Cost of College Act creates a universal financial aid award letter so that students can easily compare financial aid packages between schools.

Sources:

  • Grassley, C. (2022). Press Release: Grassley and Ernst Introduce Legislation to Provide Transparency on Student Loans.
  • Iowa Student Loan Liquidity Corporation. (n.d.). About Us.
  • Grassley, C. (n.d.). Press Release: Grassley Introduces Bill to Improve Student Loan Transparency.