States Pass Student Loan Transparency Legislation
Several states passed legislation that requires public and private colleges to provide students with certain disclosures concerning their student loans.
The legislation is inspired by a program at Indiana University that demonstrated a 16 percent decrease in undergraduate borrowing as a result of providing students with annual student loan statements.
Indiana, Nebraska, Washington and Wisconsin all passed student loan transparency legislation. Legislation is pending in other states.
The legislation requires colleges to provide personalized disclosures to students every time they borrow. These disclosures include the following student-specific information for each student:
- Total federal and private student loans borrowed so far, including accrued but unpaid interest
- Percentage of the aggregate federal loan limit already borrowed by the student, to show the student how close they are to the loan limits
- An estimate of the student’s total student loan debt at graduation, including interest, if they continue borrowing at the same rate
- An estimate of the student’s monthly student loan payment after graduation, assuming a standard 10-year repayment term
The goal of the legislation is to increase student awareness of debt, which may help reduce the amounts they borrow.
Similar legislation has been introduced in Congress, but has not yet been reported out of committee.