Bill Would Revamp the Direct Loan Plain Language Disclosure Form

NASFAA Policy and Federal Relations Staff

Direct Loan borrowers would be required to acknowledge in writing that they have read a Plain Language Disclosure Form before receiving any new Direct Loan, under a bipartisan bill introduced in the House on Wednesday by Rep. Luke Messer (R-IN) and Rep. Emanuel Cleaver, II (D-MO). Electronic signatures would be permitted.

The bill would require consumer testing of the form, and directs the Department of Education (ED) to consult with the Federal Reserve Board, which has a consumer-tested two-page model disclosure form for private loans. In developing its form, ED would also be required to consult with institutions, borrowers, and other student aid stakeholders.

Currently, ED sends a fairly complicated and dense six-page Plain Language Disclosure Form to borrowers when each new loan is made under an existing Master Promissory Note (MPN). The bill would require ED to develop an improved form that is as succinct as possible, emphasizes the loan terms that are critical to understanding the total costs of the loan and the estimated monthly repayment, and uses an easily readable font. The bill would add finance charges and annual percentage rate to the current disclosure requirements. The bill further directs ED to develop an electronic system that allows institutions and ED contractors to enter personalized loan request information, integrate NSLDS data, and generate a personalized Plain Language Disclosure Form for each borrower.

It is not clear whether ED could continue to send the form to the borrower, or if the institution would be required to generate a personalized form, collect the student's signature, and maintain a record of the signed forms for each new loan.


Publication Date: 10/26/2017

Tracy H | 10/26/2017 11:57:26 AM

Of course it's going to become the schools' responsibility...I would not expect anything less! But, who exactly is going to give the Financial Aid Offices the resources and staff to perform yet another regulatory process?

Theodore M | 10/26/2017 8:29:53 AM

I was with them right up to the point, that it could end up on the schools shoulders

I really like the idea of disclosing APR.

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