Last week, Ohio students started receiving their financial aid packages, containing information about the grants, scholarships, and loans available to them. The rising cost of college tuition means that more students will have to navigate the sometimes confusing process of applying for student loans.
Many students end up graduating with costly student loans that prevent them from making other investments like buying homes, starting businesses, or going to graduate school. Some of these costs could be avoided if students and their families had clearer information about how the loan process works.
Two-thirds of student loan borrowers don’t know the difference between safer, affordable federal student loans and private student loans, which carry more risk and have higher interest rates. Private student loans often have variable interest rates which can rise at any time and they are ineligible for federal forgiveness, cancellation or income-based repayment programs.
Despite these risks, most student borrowers don’t exhaust their federal loan options before choosing to take out private loans.
With the average debt for 2012 Ohio college graduates totaling almost $30,000, students and their families deserve to have clear information about their options when it comes to paying for college. That’s why I cosponsored the Know Before You Owe Act.
This legislation would require colleges to inform borrowers of any available federal student aid before issuing certification for a private loan and would require lenders to clearly state the difference between students’ financial assistance and their cost of attendance. Lenders would also have to send loan statements to borrowers every three months and submit an annual report regarding student loans to the Consumer Financial Protection Bureau (CFPB). The information that this act provides for students and their families will help them to make informed decisions about paying for college.
While preventing students from being indebted with costly loans when more affordable options are available is critical, we must also help graduates with existing private student loan debt. Because private loans offer fewer payment options than federal loans, many graduates find themselves overwhelmed by their monthly payments. My Refinancing Education Funding to Invest for the Future Act (REFI) addresses this problem by authorizing the Treasury Department to incentivize banks to refinance private student loans. Lowering the interest rates on private student loans would make students’ payments more affordable at no cost to taxpayers.
Higher education creates economic opportunity for Ohio’s students but student loan debt can create an unnecessary burden that can follow them through adulthood.
By reducing their student loan debt through clear information and lowered interest rates, we can ensure that Ohio's graduates have a fair shot at the future.