New Bill Plans to Aid College Students Decipher College ‘Loanese’

August 9, 2012

In a move by Congresswoman Allyson Schwartz, students will receive more information about picking loans for college and figuring out which loans don't always have a student's best interest at heart. With college loan debt now surpassing $1 trillion, Schwartz thinks there's a huge breakdown in communication over student loans and how they affect a student's overall financial future. Schwartz along with two other Democrats, Tim Bishop from New York and Jared Polis from Colorado will now require that schools counsel students on financial aid options and require private lenders to adopt steps to protect borrowers.

"Federal loans are simply a better deal," said Schwartz in a speech at the House floor. "Private loans typically have uncapped variable rates, hefty orientation feeds and fewer consumer protections."

In contrast, federal loans have fixed interest rates and even forbearance and deferment policies that allow students to stave the financial penance after graduation if they can't find work or fall under another hardship.

In addition, Schwartz stated, "We need to ensure that students have full and complete information about the most affordable student loan options available, and fight back against those who may try to take unscrupulous advantage of families facing tough financial decisions."

The new legislation is called "The Know Before You Owe Act" and requires that private lenders will have to certify with the borrower's school that the student is enrolled and that the amount that the student is eligible to borrow with the school before issuing any loans. In addition, private lenders must provide the borrower with quarter updates on their loans, including accrued but unpaid interest and capitalized interest, as well as report information to the Consumer Financial Protection Bureau about student loans.

As always, offers students some sage advice about all the different financial aid options, not limited to student loans. Check out the articles section for a breakdown about student loans and which ones may interest you if you need help paying for school.

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