Wednesday, U.S. Senators Joe Donnelly (D-IN), Ron Johnson (R-WI), and Amy Klobuchar (D-MN), introduced bipartisan legislation to help students understand the financial implications of student loans and educational debt. The Empowering Student Borrowers Act would require colleges and universities to send a letter to students every year detailing each student’s total loan debt, projected monthly repayment amounts, and the estimated interest rate for each loan. The bill would also require the Department of Education to develop best practices for colleges and universities on useful methods to teach financial literacy skills and provide information to assist students when making financial decisions related to student borrowing.
Donnelly said, “We need to take steps to better inform student borrowers and empower them to make the best decisions for their financial situation. This is a commonsense, bipartisan effort to improve the financial literacy of students so they know how much they are borrowing, how long it will take to repay, and how much it will cost each month to fulfill their obligations.”
Johnson said, “Students borrowing to pay for college should be fully aware of the financial obligations they are taking on. Making student loan information more transparent is an important step in the right direction toward helping students make responsible borrowing decisions.”
Klobuchar said, “With the skyrocketing cost of college, we must ensure that students have the basics about the financial commitments they are making to pay for their education—like estimates of their total amount of loan debt, what their monthly payments will be, and what repayment options are available. The Empowering Student Borrowers Act would provide the financial literacy tools and information that students need to get off on the right foot as they make borrowing decisions and enter the workforce.”
Jim Kennedy, Associate Vice President for University Student Services & Systems at Indiana University said, “We feel that by providing more loan information to students while they are attending the university, in addition to required entrance and exit loan counseling requirements, helps students be better informed of loan obligations and assists to prevent excessive borrowing. We appreciate Senator Donnelly’s long-standing interest in IU’s efforts to address student debt and for shining a light on the problem of over-borrowing.”
Derek Kindle, director of the Office of Student Financial Aid at UW-Madison, said, “We know that having better informed students, makes for more responsible borrowers. Annual information to students on their borrowing, repayment and loan limits is always important. We appreciate the commitment from lawmakers, like our own Sen. Johnson, to continue this conversation and support timely and accurate student information.”
Indiana and Wisconsin currently have state laws requiring colleges and universities to send these annual letters to their students. Indiana University started the practice in 2012 and found that students significantly changed how much they borrowed after becoming more aware of their debt. According to Indiana University, from the 2011-12 academic year to 2016-17, IU students had a $112.8 million (17%) decrease in student loans. The Wisconsin state law just went into effect for the 2017-18 academic year.
This bill builds on bipartisan legislation Donnelly previously introduced.