How 3 Biparty Senate Bills Could Affect Student Loans Ranger student loan

A bipartisan group of U.S. senators recently introduced three bills aimed at making it easier to navigate the financial aid and student loan processes for families trying to pay for their education.


The bills, introduced in late April and developed by Minnesota Democrat Tina Smith and Iowa Republicans Chuck Grassley and Joni Ernst, are the Understanding the True Cost of College Act of 2021, the Net Price Calculator Improvement Act, and the Know Before You Owe Federal Student Loans Act.

Although standardized and clearer language on its own will not make the university more affordable or put more money in students’ pockets, it is still essential for students and their families to have clear information. , timely and exploitable on the costs of the university and student loan debt. And with rising costs outstripping income growth, more students than ever need financial assistance – including loans – to pay for their college education.

Once a student has been accepted into a college, he or she receives an offer of financial aid, usually referred to as a award letter, which describes the total cost of education for the first school year and the type of help available. While these offers are meant to communicate important information, including student loan information, too often they are confusing, unclear, or misleading.

Colleges are not required to adhere to a standardized format or terminology when advising applicants of their financial aid offer, often making it difficult for families to get a full picture of how the school would be paid and how to compare offers between institutions.

New Understanding the Real Cost of the Colleges Act seeks to address this problem by requiring the Secretary of Education to develop a standardized format and terms that colleges would use to relay key information, including clearly distinguishing between grants – which do not have to be repaid – and loans.

The bill requires the secretary to work with a range of stakeholders, including students and families, military and veterans, financial aid experts, nonprofit and consumer groups, and school counselors to develop this improved format.

As part of the standardized format – which schools would now call a “financial aid offer” – colleges would have to clearly indicate cost information at the start of the offer. They should then include a separate and distinct list of sections. subsidies and Scholarships, followed by a statement of the net price the student should pay, in turn followed by details of non-PLUS loans recommended by the school – all stated “in a user-friendly, simple and understandable manner”, according to at the proposed legislation.

The bill also requires certain language related to student loans, including “the clear use of the word ‘loan’; »» Clear labeling of subsidized and unsubsidized federal loans; various disclosures, including options to possibly borrow less or more than recommended; and a link and explanation of the United States Department of Education Loan Simulator Repayment Calculator.

And, if the results of consumer tests warrant it, the secretary of education could also ask colleges to include information such as the school’s statistics on the percentage of its students who borrow student loans as well as median student loan debt and recent graduate default rates. .

Meanwhile, the Know Before You Need Federal Student Loans Act would improve the federal council on student loans. Every student who borrows federal student loans, which constitute over 90% of student debt in the United States according to recent figures, is required to complete input tips, a series of online modules designed to educate students about borrowing and repaying.

The bill would, among other things, amend the Higher Education Act of 1965 to update the conditions – including changing from entry counseling to “pre-loan counseling” – so that borrowers have a better understanding of the policy. debt they incur and the impact of factors such as interest rates and repayment options.

Research suggests that while students are hungry for information on how to finance their education and manage their federal student loans, the current counseling format is somewhat ineffective. This bill aims to provide students with better and more frequent advice, including new information such as an estimate of their total expected debt upon graduation, how to graduate on time to cut costs, and a expected debt-to-income ratio based on their current program. of Study.

The third senators’ bill, the Net Price Calculator Improvement Act, would also amend the Higher Education Act and improve another key information tool for student loan borrowers: net price calculators.

The net price is the amount a student must provide to pay for their education after factoring in any financial aid that does not need to be repaid, such as grants, scholarships, or tuition waivers.

For example, if the annual sticker price of a school is $ 40,000 and a student receives $ 30,000 in the above types of assistance, the student’s net price would be the difference: 10 $ 000. This is the amount that a student has to cover, which is usually done with sources such as income, savings, loans or a combination.

By looking at the net price rather than the sticker price, many students may find that schools they thought were too expensive may be close at hand.

Net Price Calculators allow potential students to look beyond college sticker prices for early, personalized estimates of college fees and financial assistance. Although the Department of Education requires colleges to include a net price calculator on their websites, the tool can be difficult to find and use.

To address this problem, the new bill would allow the Secretary of Education to create a “universal net price calculator,” a centralized tool that would allow users to obtain comparable net price estimates for many colleges without having to. enter their information multiple times on different websites. Among other stipulations, the law also allows anonymity and guarantees the confidentiality of information provided by users.

Along with other new efforts to make the university more affordable and reduce the need for student loans, these bipartisan bills would give students access to better information as they go. decide where to go to college and how to pay for it. While it’s hard to predict what Congress will do, lawmakers may well decide to pass these bipartisan bills and help students and families across the country make informed choices about college costs. and the potential role of student loans.

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