Washington, D.C. – With student loan debt now topping credit card debt at over $1 trillion, and with students and families nationwide getting lost in the fine print of financial aid documents that can hide the true cost of a college education, U.S. Senator Kirsten Gillibrand today announced a new plan to provide transparency for students and families by standardizing financial aid documents.
“A college degree should be a ticket to the American Dream, not a ticket to financial ruin,” Senator Gillibrand said. “But for millions of students and their families, that dream is getting lost in the fine print of forms that hide the true cost of college, and saddle families with unexpected debt. It’s time to simplify and standardize student loan forms so students know the cost of their education, understand the terms of their loans, and can plan their future with peace of mind.”
The growing cost of college is among the biggest barriers preventing prospective students from pursuing higher education. Part of that decision process includes deciphering complex student loan application forms. And unlike banks and mortgage companies that are now required to disclose interest rates and total payments on loans upfront, student loans vary from one institution to the next, use their own terms, often leaving students and parents lost in the fine print of an opaque set of documents that can hide the true cost of a student’s education, and saddle families with debt they never knew to plan for.
More than 1 million New York students are enrolled in higher education, as of the 2009-2010 school year, who will amass an estimated average of more than $26,000 per student in debt on student loans, according to College Insight. Regional data for New York State is attached.
Standardize and Simplify Student Loan Forms
To equip students and their families with the information necessary to understand the full costs of a college education, Senator Gillibrand is pushing the Understanding the True Cost of College Act, legislation that would set a uniform financial aid form to establish one set of terminology, allowing consumers to easily compare the costs of higher education across all institutions, and gain a clear understanding of the long-term financial obligation before committing to a financial aid package for a college or university. The form would include direct and indirect costs for the entire anticipated course of study.
Specifically, the Understanding the True Cost of College Act would:
- Require institutions of higher education to use a uniform financial aid award letter.
- Call on the Department of Education to work with colleges, consumer groups, students, and school guidance counselors to develop standard definitions of various financial aid terms for use in the uniform financial aid award letters.
- Establish basic minimums of information that must be included on page one of the uniform financial aid award letters, including: cost of attendance; grant aid; the net amount a student is responsible for paying after subtracting grant aid; work study assistance; eligible amounts of federal student loans; expected federal loan monthly repayment amounts; and disclosures related to private loans
- Require the Department of Education to establish a process to consumer test the uniform financial aid award letter and use the results from the consumer testing in the final development of the uniform financial aid award letter.
- Require all institutions of higher education which receive federal financial assistance to use the proposed form to make any offers of financial aid to students.
This morning, the U.S. Department of Education and the Consumer Financial Protection Bureau released its official model financial aid form. While this is a step toward greater transparency, Senator Gillibrand is urging bipartisan Senate leaders to move swiftly on a vote on the Understanding the True Cost of College Act, which would require all higher education institutions to implement the new form. Currently, using the form is voluntary, and only 10 university systems have chosen to do so.
Senator Gillibrand’s complete letter to Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-IA) and Ranking Member Mike Enzi (R-WY):
Dear Chairman Harkin and Ranking Member Enzi,
I write to you today to respectfully request that the Health, Education, Labor and Pensions Committee move forward on marking up the Understanding the True Cost of College Act of 2012, S. 3244. This legislation would establish a uniform set of terminology on financial aid forms, allowing consumers to easily compare the costs of higher education across all institutions, and gain a clear understanding of the long-term financial obligations before committing to a financial aid package for a college or university. The form would include direct and indirect costs for the entire anticipated course of study. S. 3244 has bipartisan support and aligns with many of the hearings on college affordability and transparency that the Committee has held during the 112th Congress.
With student loan debt now topping credit card debt at over $1 trillion dollars and with students and families nationwide getting lost in the fine print of financial aid documents that can hide the true cost of a college education, more needs to be done to ensure that prospective students have the information they need when deciding on higher education.
The Administration took a major step today in introducing the Shopping Sheet, a tool developed in conjunction with the Department of Education and the Consumer Financial Protection Bureau to promote transparency in student financial aid disclosures. This tool that higher education institutions can voluntarily use to inform current and prospective students on the cost of attendance, financial aid options with a clear distinction between grants, scholarships, and loans, as well as recommendations on the amount of loans a student should take out to cover out-of pocket costs, is a great step forward for students and families all across this country. With information presented in a standardized format, the consumer can make a better-informed decision on which institution would best fulfill their educational goals. While this is a great step in the right direction, the Shopping Sheet isn’t mandatory, providing further impetus for moving forward with this common-sense piece of legislation.
Passage of the Higher Education Act in 2008 re-established Congress’ commitment to addressing our student debt crisis on multiple fronts; by requiring institutions to include net cost information to current and prospective students; by urging colleges and universities to more aggressively control their costs and improve their completion rates; and encouraging institutions of higher education to meet new standards of transparency and to provide that information in user friendly formats. I believe the goals you are addressing with your leadership on the HELP committee naturally aligns with my commitment to improve the ability of students and parents to make fully-informed and financially-appropriate choices in financing their college education and I encourage you to consider S.3244 before your committee.
Again, thank you for your respectful consideration. Please contact Michele Jawando in my office with any questions you may have.
Kirsten E. Gillibrand