As American students and families face staggering student loan debt, U.S. Senators Joni Ernst (R-Iowa) and Chuck Grassley (R-Iowa) are proposing a new measure that would pull back the curtain and give prospective students a clear estimate of the costs they would owe years down the road before they take out a loan.
The senators’ bill—the Student Transparency for Understanding Decisions in Education Net Terms, or STUDENT, Act—would provide student loan applicants with an estimate of the total amount of interest they would pay, based on a standard 10-year repayment plan, during or prior to accepting a loan.
“Students and their families should have a clear picture about the true costs associated with their loans so they can fully understand how they’ll impact their future,” said Senator Joni Ernst. “Providing them with the tools to know what the real deal is with their federal student loans is commonsense and will help them make informed decisions.”
“As the cost of college continues to skyrocket, I frequently hear from Iowa students surprised by the amount they owe and concerned about paying back their loans. Our STUDENT Act, along with several other bills I’ve introduced like the Know Before You Owe Student Loan Act, would help shine a light on the true costs students and their families face before they begin borrowing money. This transparency would also help students shop around and fully factor in the cost of college, letting the free market bring down the price of higher education. I’ll continue working with my colleagues on making higher education loans more transparent to empower our students to succeed,” Senator Chuck Grassley said.
Ernst’s and Grassley’s new legislation is supported by both Iowa College Aid and the Iowa Student Loan Liquidity Corporation:
Dr. Mark Wiederspan, Executive Director of Iowa College Aid, said, “The proposed STUDENT Act will give students and their families additional information to fully understand their federal student loans. We hope this information helps them make more informed decisions on the best way to finance and achieve their educational goals.”
Steve McCullough, CEO of the Iowa Student Loan Liquidity Corporation, said, “As college costs increase, it is even more important that students fully understand the cost associated with their loans, and the importance of borrowing as little as possible. At Iowa Student Loan we support Senator Ernst’s STUDENT Act as it would make the cost of Direct Student Loans transparent, enabling students to make better college financing decisions.”
Current law does not require the disclosure of the total interest amount that a student loan applicant would pay based on the applicable repayment plan. As a result, many students are not aware of the actual amount they will end up paying over the life of a loan. The STUDENT Act makes the disclosure of the total interest amount required during or before an applicant takes out a loan.
Ernst and Grassley have partnered on a number of bipartisan bills to help provide students and their families with better information about the costs of college, including:
· The Net Price Calculator Improvement Act – improves the effectiveness of and access to tools that provide students with early, individualized estimates of higher education costs and financial aid before they decide where to apply.
· The Understanding the True Cost of College Act – creates a universal financial aid award letter so that students could easily compare financial aid packages between schools.
· The Know Before You Owe Federal Student Loan Act – makes counseling an annual requirement before new student loans are disbursed, rather than just for first-time borrowers.