U.S. Senator Al Franken and eight co- sponsors introduced a bill that would require colleges to use a standard format for financial-aid award letters so students and parents can more easily compare packages from different schools.
The legislation, "Understanding the True Cost of College Act," introduced today, will help families compare financial aid offerings and differentiate between grant aid and student loans, Franken, a Democrat from Minnesota, said in a statement.
Colleges send letters to students they've accepted outlining costs, scholarships as well as loan information. The letters are often confusing and fail to differentiate clearly between awards and the money a student might need to borrow to cover tuition and other expenses.
There is no federal requirement to disclose interest rates or total loan payments as there are for other types of loans such as mortgages.
The bill would establish information that must be included such as the cost of attendance, the net amount a student is responsible for paying after subtracting grant aid, expected federal loan monthly repayment amounts and disclosures related to private loans, according to the statement.
The co-sponsors include Democrats Tom Harkin of Iowa, Richard Blumenthal of Connecticut, Chuck Schumer of New York, Barbara Mikulski and Ben Cardin of Maryland, Tim Johnson of South Dakota and Ron Wyden of Oregon. Republican Charles Grassley of Iowa is also a co-sponsor.
Yesterday, a group of financial-aid administrators released recommendations to make award letters less confusing. The National Association of Student Financial Aid Administrators is opposed to the standardized letter and prefers to give colleges the flexibility to design their own correspondence.
Sen. Franklin also said he is backing legislation to keep federally subsidized Stafford student-loan interest rates at 3.4 percent. Those interest rates are scheduled to double July 1.
Source: Business Week; Bloomberg News; The Uptake
