Senate bill would empower student loan borrowers through financial literacy
Today, U.S. Sens. Mark R. Warner (D-VA), Dean Heller (R-NV), Tim Kaine (D-VA) and Cory Gardner (R-CO) introduced bipartisan legislation to help student loan borrowers make smart decisions in the financing of their higher education.
The Empowering Students Through Enhanced Financial Counseling Act would promote financial literacy by providing students who are recipients of federal financial aid with comprehensive counseling services. Nationwide, Americans owe more than $1.3 trillion in student loan debt, outstripping credit cards and auto loans as the country’s leading source of non-housing debt. A companion bill has been introduced in the House of Representatives and carries strong bipartisan support.
“In January, Senator Kaine and I met with student leaders from 20 colleges and universities across Virginia, who shared the challenges they have faced paying for college and the negative effects of crippling student loan debt. Several of the students had powerful personal stories about their struggles to find the money for college, and how they wished they had had better information about their options when they were taking out tens of thousands of dollars in loans to finance their education,” said Sen. Warner. “And these kinds of stories are common across the Commonwealth. Today, a college student in Virginia can expect to graduate with more than $26,000 in debt. As the first person in my family to graduate from college, I know that if I had graduated with that level of debt, I would not have had opportunities to try – and to fail – with several of my early business ventures. By neglecting to give students meaningful financial counseling when they take out loans to pay for college, we’re limiting their options and stifling our country’s economic future. I’m proud to be leading this bipartisan effort in the Senate to empower students with the information they need to make informed decisions about their futures.”
“Recently, student loan debt rose to a record high of $1.35 trillion nationwide. Now more than ever, it is critical to ensure that students are making smart decisions about financing their higher education. Navigating the student loan process can be complicated and confusing, and students deserve to have the tools they need to manage their loans in a responsible way. I am proud to introduce this legislation alongside Senator Warner to provide students with essential information to make well-informed, sound financial decisions for their college education and future,” said Sen. Heller.
“College affordability is an issue our country is grappling with at the national level, state level and especially at the family level,” Sen. Kaine said. “This bill will help families make smart decisions when they take out loans by providing comprehensive financial guidance. We need to implement these strategies for students in high school so they are well-informed early, can afford to get a higher education and have a successful start to their career without being weighed down by student loan debt.”
“Student debt continues to negatively impact Coloradans and Americans across the country, and that’s why it’s important that students receiving federal financial aid have access to resources, including financial counseling, that will better inform their financial decisions prior to undertaking massive student loan debt,” said Sen. Gardner. “A high quality education provides students with the tools they need to succeed, and financial literacy is an essential component to achieving that success. I look forward to working with my colleagues on both sides of the aisle to advance this bipartisan proposal that provides institutions of higher education with the resources they need to expand educational opportunities.”
In January, Sens. Warner and Kaine hosted student government presidents from 20 Virginia colleges and universities for a roundtable conversation on college affordability and student debt. During the meeting, students – representing a diverse cross-section of Virginia’s public and private, two- and four-year colleges and universities – shared their challenges paying for college and the impact of rising student loan obligations on their academic obligations and future careers. Several students present urged more transparency and flexibility in navigating the confusing maze of loan and repayment programs available to college students, as well as more accountability for colleges to hold down costs.
A survey of current students and recent graduates with a high level of student loan debt found that more than 40 percent could not recall having received financial counseling, even though counseling is already required before students can receive their first federal loan. Further, no counseling is provided to students who receive only a Pell Grant or to parents who take out federal loans to help pay for their children’s education. As a result, many students graduate unable to manage the loans they used to finance their education, leading to significant hardship for borrowers and greater risk for taxpayers.
To help students make smart decisions about financing their higher education, the Empowering Students Through Enhanced Financial Counseling Act will promote financial literacy through enhanced counseling for all recipients of federal financial aid. Specifically, the bill:
- Ensures borrowers, both students and parents, who participate in the federal loan program receive interactive counseling each year that reflects their individual borrowing situation.
- Directs the Secretary of Education to maintain and disseminate a consumer-tested, online counseling tool that institutions can use to provide annual loan counseling, exit counseling, and annual Pell Grant counseling.
- Provides awareness about the financial obligations students and parents are accumulating by requiring borrowers to consent each year before receiving federal student loans.
- Informs low-income students about the terms and conditions of the Pell Grant program through annual counseling that will be provided to all grant recipients.
Several students who joined the January roundtable with Sens. Warner and Kaine today commended the Senators’ effort to address financial literacy and the burden of student debt.
“Today, in America, going to college is an act of courage. As students we face rising tuition costs, campus-housing waitlists and the American student loan debt crisis is overwhelming us with fear,” said Thomas Nelson Community College Student Government President Jasmane Ormond. “The time to empower students with enhanced financial counseling is now. This bill will help our students feel financially confident enough to finish their degrees, and manage our debts effectively.”
“As student debt continues to increase across the nation, financial literacy for students is critical for ensuring that this generation is educated and prepared on how to successfully make financial decisions. This type of education needs to occur before and while students are receiving their degree, for students to have the skills and information that they need to make decisions that will help them to successfully pay off their debt, after graduating,” said George Mason University Student Government President Khushboo Bhatia. “Senator Warner’s bill is very important and I thank him for his strong interest in the student debt issue. Financial literacy will help students better understand their options to pay for college, and help students to navigate their financial decisions, so that they can eventually be debt-free.”
“The Empowering Students Through Enhanced Financial Counseling Act is a strong step in the right direction to making higher education more affordable for young Americans of all socioeconomic backgrounds. Interactively counseling us based on our specific borrowing situation will be incredibly beneficial in informing us how to pay back our loans in a sensible way,” said Radford University Student Government President Colby Bender. “I am a first-generation college student who had to learn to navigate the very confusing federal financial aid process with only an entrance interview and no other counseling along the way. I am excited that Senator Warner took we students’ recommendations and opinions in such serious consideration and am proud that we have such a strong advocate in the United States Senate.”
“The roundtable was a great experience to be involved in and I think Senators Warner and Kaine are aware of the issues surrounding college debt,” said Ferrum College Student Government President Danielle Hannuksela. “Many want to become educated citizens but may not have the opportunity due to the rising tuition and high interest rates on loans.”
“Most students won’t realize the effects of debt until they are out of college, and on their own,” said Virginia Commonwealth University Student Government President Sarah Kilmon. “Students like myself sign on to massive school loans without proper awareness of all that they entail. This bill will allow students to stay more aware of college debt, and put us on the path to solving the college debt crisis.”
“NACAC is pleased to support the bipartisan Empowering Students Through Financial Counseling Act,” said National Association for College Admission Counseling CEO Joyce Smith. “NACAC supports efforts to ensure that our nation’s students understand the financial aid options available to them and how to best pay back the loans they have taken out to pay for their post-secondary degree.”
In the Senate, Sen. Warner has introduced several bills to improve transparency, accountability and affordability in higher education, and help borrowers better manage their student loan debts. The Dynamic Student Loan Repayment Act would make income-based repayment the default option for borrowers. TheEmployer Participation in Repayment Act would allow employers to apply pre-tax income to help their employees with student loan payments. Sen. Warner also is an original cosponsor of The Student Right to Know Before You Go Act, which would provide college-bound students powerful new tools for comparing colleges and universities on measures such as total cost, likelihood of graduating, and potential earnings by program.