Bipartisan Bill to Increase Transparency in Federal Student Loan System Introduced in the House
By Jill Desjean, Policy and Federal Relations Staff
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
Phil A | 8/21/2019 12:36:54 PM
Too much information has the same result as too little information. Students need meaningful, efficient, and easily understood notices about their loan obligations. Pages of legal text and multiple notifications simply make politicians and administrators feel better. I could not agree more with David S, the problem is not too little information, it is too little grant funding. These policies are directed at the extreme margin of the population rather than reasonable consumers who borrow because they must.
Cynthia B | 8/21/2019 10:56:09 AM
Having been a former FFELP representative, I can tell you from experience that students need the "nudging". Even if they only get one thing from each document, it will at least be a reminder of their obligation and they can't say no one told them.
Melissa H | 8/21/2019 10:44:34 AM
I would like to see a bill that consolidates all existing disclosures into one succinct document that students will actually read.
Jennifer S | 8/21/2019 9:41:46 AM
I respectfully disagree. The more messages they get from different sources (including the institution), the more likely it will sink in, over time. I see no downside to getting more and useful information in front of them, wherever possible. I'm tired of hearing about students who "had no idea" what they were doing. This has been made possible due to the 10-year MPN, rules that require (almost) that we offer maximum eligibility, allowing passive acceptance and the idea that "everybody's doing it."
With a heightened media focus on the issues and an earlier start to the aid application cycle, conversations are finally happening around the dinner table about affordability before families commit to something they can't or ought not afford. If piling on disclosures turns out to be this pendulum swinging too far in the other direction, I'm OK with that until we are pretty sure we've had a stable course-correction from the past.
David S | 8/21/2019 9:41:03 AM
I bet if someone did the research, they'd find that the more emails or texts or pushed messages using whatever technology a person gets, the less likely they are to read them all. While I'm all for transparency and making all relevant information at all stages of the financial aid lifecycle, I'm not convinced that repayment difficulties are the result of people not having enough information. What this well intentioned bill adds up to is TLDR - Too Long, Didn't Read.
Reduce college costs so that students don't have to borrow as much. States, support higher ed at the rates you used to. Pell Grants with real purchasing power. Much better wages for workers instead of CEO's deciding that all of the money belongs to them, and unions so that workers have more power. Better loan servicing, proper administration of defense to repayment, keeping PSLF alive and robust. There. Just solved the student loan repayment problem. You're welcome.
Angela C | 8/21/2019 8:35:02 AM
If students get too many disclosures, none will get read. Monthly may be way too much on top of what they already get.
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