Consumer Financial Protection Bureau and ED to Develop Model Financial Aid Disclosure Form
The Consumer Financial Protection Bureau (CFPB) announced yesterday that it is partnering with the U.S. Department of Education to launch a “Know Before You Owe” project to create a model financial aid disclosure form for students and parents.
The project’s starting point is a model, one-page “financial aid shopping sheet” that colleges and universities could use to convey up-front information about financial aid awards and the costs and risks of student loans.
The CFPB and Obama administration are careful to refer to the model disclosure form as a “thought starter” and not in final format. Currently, it includes:
- Total cost for full-time attendance (broken down into components)
- Total grants and scholarships
- The amount the student will pay for one year (the difference between total cost and grants/scholarships)
- Loan and work study options
- Estimated monthly federal loan payments and estimated monthly private loan repayments
- Total estimated debt and estimated monthly payment for all loans
- Institutional default, graduation and retention rates
- Institutional cost for the student compared to the average cost at that institution and the average costs at institutions in other sectors
Similar to other initiatives of the CFPB, consumers will be asked to provide comment on the model by answering questions about the clarity of information and the information they think is the most critical and helpful. In addition, consumer reviewers will be asked to rank the following in order of importance to them:
- My likely ability to repay my loans
- Whether students at this school have been able to repay their loans
- What I pay compared to the average student at this school
- What I pay compared to the average students at this type of school
- Estimated debt at graduation
- Estimated monthly payment after graduation
- My expected debt compared to national averages
- A complete breakdown of the costs at this school, by category
- The school’s graduation rate
NASFAA is engaging the CFPB, White House, and Department of Education to provide feedback and input throughout this process. We also encourage NASFAA members to provide feedback through the online ranking tool.
The CFPB and Department of Education maintain that the current award letter terms are unclear and confusing because of variations in terminology and formatting. Their proposed model disclosure form seeks to address these concerns.
Last month the Department held a public hearing to solicit feedback from the public and higher education community on the best practices for financial aid award letters as required by the Higher Education Opportunity Act. At the hearing, NASFAA president Justin Draeger also recommended that certain terms carry standardized definitions. However, he also urged the administration to give institutions flexibility to customize award letters to meet the unique needs of their student population. NASFAA constructed a list of highly recommended elements to be included on the award letter or in accompanying materials, but cautioned against a standardized format. While it remains unofficial, it is likely that these two projects will ultimately be tied together.
The project was announced alongside two initiatives from the Obama Administration aimed at lowering monthly student loan payments for borrowers struggling to repay their loans.