An offer for a college loan and financial aid should be easy to understand. But it’s not, according to Senator Al Franken (DFL-MN) since colleges sometimes send out letters offering a loan, that never even use the word “loan” in the letter.
So today, surrounded by college students who borrow money to pay for their education, Senator Franken announced the “Understanding The True Cost Of College Act” that would require colleges to use easier to understand language in their financial aid package offers to students.
Senator Franken also said he is backing legislation to keep federally subsidized Stafford student loan interest rates at 3.4 percent. Those interest rates are scheduled to double on July 1st.
Press release from Senator Al Franken
As the May 1st deadline approaches for many Minnesota high school students to decide where to go to college, U.S. Sen. Al Franken (D-Minn.) today outlined new legislation that he will introduce in May to help families get a clearer picture of the true cost of that education before choosing a school.
Sen. Franken said his measure, the “Understanding the True Cost of College Act,” would create a universal financial aid award letter so that students can compare financial-aid packages between schools. It would clarify what families will receive in aid from a school and create standard terms for the aid offered so that students can accurately compare financial aid offers from various schools. Right now, schools do not use standard definitions or names for different types of aid so students and their families report having difficulty figuring out the differences between grant aid which does not need to be repaid and student loans, which do need to be repaid. Currently, Minnesota students graduate from college with an average debt of more than $29,000, the fourth highest in the nation.
“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,” Sen. Franken said at a State Capitol press conference Monday. “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.”
The “Understanding the True Cost of College Act” would:
Require institutions of higher education to use a uniform financial aid award letter.
Call on the Department of Education to work with colleges, consumer groups, students, and school guidance counselors to develop standard definitions of various financial aid terms for use in the uniform financial aid award letters.
Establish basic minimums of information that must be included in the uniform financial aid award letters, such as: cost of attendance; grant aid; the net amount a student is responsible for paying after subtracting grant aid; work study assistance; eligible amounts of federal student loans; expected federal loan monthly repayment amounts; the unmet financial need of students; and disclosures related to private loans, front-loading of grants, and treatment of scholarships.
Require the Department of Education to establish a process to consumer test the uniform financial aid award letter and use the results from the consumer testing in the final development of the uniform financial aid award letter.
Sen. Franken said he plans to introduce the measure when the Senate is back in session in May.
Fighting to Stop Student Loan Interest Rate from Doubling
Sen. Franken was joined at the press conference by leaders of three statewide student groups, who back his efforts to clarify the cost of college and his work to keep federal student loan rates from doubling. Without Congressional action, interest rates on new federally subsidized Stafford loans are scheduled to go from 3.4 percent to 6.8 percent on July 1. More than 200,000 Minnesota students are expected to take out subsidized Stafford loans this year.
“College loan debt now exceeds a trillion dollars and has surpassed even what Americans owe on their credit cards,” Franken said. “If a college education becomes even more unaffordable and if we keep sending our newly-minted graduates out into the work force awash in debt, it will negatively impact our nation’s economic future and our ability to remain competitive. I am a cosponsor of legislation to keep the interest rate from doubling and I’m going to continue to work with my colleagues to keep college costs down for Minnesota students and their families.”