Last week, Rep. Donna Shalala (D-FL) introduced a bipartisan student loan transparency bill—dubbed the Student Loan Disclosure Transparency Act of 2019—that would both increase the frequency with which students are provided federal loan disclosures, and add a number of items to the existing list of what servicers must disclose.
Prior to disbursement, students would be provided a new disclosure detailing the loan’s principal balance, interest rate, estimated months until repayment start date, estimated balance at repayment start date, estimated monthly payment amount, and estimated total cost of the loan over its lifetime. This new disclosure would be in addition to—not in place of—the current pre-disbursement disclosure during the entrance counseling process.
The bill would also require servicers to add to the pre-repayment disclosure the projected monthly payment amount, and the cost of allowing interest to capitalize versus paying interest as it accrues.
The bill makes several changes to disclosures required during repayment, the first of which is to have these disclosures begin within 30 days of disbursement and to be issued monthly, regardless of whether a payment is due. This would include in-school, grace, deferment, and forbearance periods. Several items are added to the existing repayment disclosure as well, including the current balance on all loans, lifetime interest accrued, interest accrued since last statement, and an estimate of the total amount the borrower will repay over the life of the loan. For loans not yet in repayment, estimated repayment start date, estimated monthly payment amount, and estimated balance to be owed would need to be included as well. Finally, borrowers would be informed of the option to pay interest as it accrues or to allow interest to capitalize and add to the total cost of the loan.
The Department of Education (ED) would be required to conduct consumer testing and report results to Congress within two years on the effectiveness of the new monthly disclosures in helping borrowers understand their loan terms and conditions.
Publication Date: 8/20/2019