Bringing Transparency to College Costs and Borrowing
Amid the Congressional debate over how to offset the cost of keeping interest rates on Stafford loans from doubling, Senator Al Franken today unveiled new legislation that would require colleges to fill out a uniform financial aid letter for student applicants.
Speaking at a press conference covered by The Uptake Franken said:
Families in Minnesota and across the country often struggle to understand the financial aid letters they receive from schools, which can be complicated and leave them in the dark about the amount of debt they will ultimately be responsible for...
Students report that the letters they receive are confusing and don’t use common definitions, so it’s hard to compare financial aid packages from different schools. My legislation would create a universal financial aid award letter and allow families to compare apples to apples when deciding what school a student will attend.
Our recent report on state disinvestment in higher education, The Great Cost Shift, detailed the increased financial burden faced by families. As if the reality of growing costs isn't bad enough, the fuzziness about college loan and aid packages is such that students and parents can get even deeper int0 debt than they realize.
Most colleges may be either public or nonprofit organizations, and aren't the sharks found so often in the private sector. Still, it turns out that some behave with questionable integrity, and certainly inadequate tranparency, when it comes to leveling with their consumers about costs and borrowing. So Franken's measure is great news for students and their families about to take on thousands (and thousands) of dollars in debt.
Franken's announcement follows last week's launch Consumer Financial Protection Agency launch of a beta college cost tool as part of their Know Before You Owe project. You can try it out and submit feedback.
Who knows, maybe we did learn something from the housing bubble after all -- an era in which legions of Americans signed up for loans they didn't understand. One clear moral of that story: Everyone should know what they are borrowing.
