Know Before You Owe Act
"Today, Congressman Jared Polis (D-CO), along with Representatives Allyson Schwartz (D-PA) and Tim Bishop (D-NY), introduced legislation to tackle the rising student loan debt crisis by bringing fairness, common sense, and transparency to the student loan process," according to a post on Northern Colorado 5. "According to the Consumer Financial Protection Bureau (CFPB), American families face an avalanche of more than $1 trillion in student loan debt, which amounts to approximately $24,000 in student loan debt for each of the 37 million student borrowers. The Know Before You Owe Act would help level the playing field by ensuring that student borrowers know about the financial advantages of lower cost federal loans before borrowing in the private market. According to the CFPB, 40 percent of students who have private student loan debt, had not exhausted all of their federal loan options, which come with interest rates as low as 3.4 percent compared to an average of 7.8 percent for private loans, before taking out more expensive private loans. 'In today’s knowledge-based economy, a college degree is the best investment that a student can make for their future,' said Rep. Polis. ... The Know Before You Owe Act would require private lenders to: certify with the borrower’s school that the student is enrolled and the amount the student is eligible to borrow before issuing a private loan; provide the borrower with quarterly updates on their loans, including accrued but unpaid interest and capitalized interest; report information to the CFPB about their student loans. The bill would also require institutions of higher education to inform students about: their federal financial aid availability and eligibility; their ability to select a private lender of their choice; the impact of a private loan on their eligibility for other forms of financial aid; their right to accept, reject, or cancel a private loan as allowed under current law; and the terms and conditions of federal and private student loans. The bill is supported by the National Association of Student Financial Aid Administrators, National Association for College Admission Counseling, National Council of La Raza, Council for Opportunity in Education, Young Invincibles, National Consumer Law Center, The Institute for College Access & Success, National Consumers League, American Federation of Teachers, The Education Trust, U.S. Public Interest Research Group, Consumer Action, Democrats for Education Reform, American Podiatric Medical Students' Association, American Podiatric Medical Association, Association of American Medical Colleges, Demos, and Student Administrator Affairs in Higher Education. 'The financial aid community stands behind The Know Before You Owe Act, which takes the important step of requiring full institutional certification of all private student loans, just as is currently required on all federal student loans. Private student loans often lack important consumer safeguards like the income-based repayment options and guaranteed deferments of federal student loans. This bill will allow aid administrators to provide better counseling on debt management by giving schools a fuller picture of students’ financing options. The Act also excludes federal student loans from Health and Human Services from the definition of a private education loan, providing a much-needed fix to a legislative provision that has caused confusion to student borrowers for years. NASFAA urges Congress to support this legislation.' – The National Association of Student Financial Aid Administrators."
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