U.S. Senator Joni Ernst (R-IA), has joined Senator Mike Enzi (R-WY) and U.S. Representative John Curtis (R-UT), in introducing legislation that would improve the information provided to students and families taking on federal loans to finance higher education. The bill was also cosponsored by U.S. Senators John Barrasso (R-WY) and U.S Representatives Ted Budd (R-NC) and Bill Posey (R-FL).
The Transparency in Student Lending Act would require disclosure of the annual percentage rate (APR) for federal student loans. The APR assists borrowers by showing the true cost of a loan, helping students and their families make more informed financial decisions. Currently, borrowers of private student loans receive this information, but borrowers of loans issued by the Department of Education do not.
“Over 90% of student loans are originated and guaranteed by the federal government,” Ernst said. “It’s critical that prospective students and their families have access to necessary information about these loans when considering their lending options, and that’s exactly what this bill does.”
“Borrowers of federal student loans need transparent information when considering loan options and federal student loans should have to be upfront about their true costs,” Enzi said. “This bill would provide more transparency so families can be better informed about their financing options.”
“As our global economy grows ever more competitive, education is key. Unfortunately, costs—including hidden costs—can be crippling,” Curtis said. “As the primary provider of the vast majority of student loans and education financing options, the federal government should provide a transparent and full accounting of associated costs and fees for borrowers. I represent the youngest Congressional district in the country with an average age of 26 years old; these students must be equipped to make the right decisions for their families and their futures.”
“Students face many challenges in trying to plan and pay for college. When making these important financial decisions, they shouldn’t have to struggle to understand the true cost of their federal student loans,” Barrasso said. “Our bill will provide much needed transparency to the federal loan process and give students and their families more certainty when it comes to financial planning.”
The APR is expressed as a single percentage number that represents the actual yearly costs of funds over the term of the loan and takes into account the stated interest rate of the loan and any fees or additional costs associated with the loan.
The Consumer Banker Association, Education Finance Council and Utah Higher Education Assistance Authority have all voiced support for the legislation.
