A bipartisan group of senators introduced Wednesday a bill to help students understand the financial implications of student loans and educational debt.
The Empowering Student Borrowers Act, introduced by Sens. Ron Johnson (R-WI), Joe Donnelly (D-IN), and Amy Klobuchar (D-MN), would require colleges to send a letter to students every year about their total loan debt, monthly repayment amounts, and the estimated interest rate for each loan.
Further, the legislation would require the Department of Education to develop best practices for colleges on ways to teach financial literacy skills and help students make sound financial decisions related to borrowing.
“Students borrowing to pay for college should be fully aware of the financial obligations they are taking on,” Johnson said. “Making student loan information more transparent is an important step in the right direction toward helping students make responsible borrowing decisions.”
Derek Kindle, director of the Office of Student Financial Aid at UW-Madison, said better-informed students makes for more responsible borrowers.
“Annual information to students on their borrowing, repayment and loan limits is always important. We appreciate the commitment from lawmakers, like our own Sen. Johnson, to continue this conversation and support timely and accurate student information,” Kindle said.
Indiana and Wisconsin already have state laws requiring colleges and universities to send these annual letters to students. Indiana University started doing it in 2012 and found that students changed how much they borrowed after learning about the debt they would take on. From the 2011-12 academic year to 2016-17, IU students had a $112.8 million (17 percent) decrease in student loans.
The Wisconsin law just went into effect this year.