Increased College Disclosure Leads to Smarter College Choices
NEW YORK ( MainStreet) President Barack Obama's college ranking proposal , released last month, has made college ranking all the rage without putting much emphasis on disseminating user-friendly information about the colleges themselves. Ranking alone won't determine the suitability of specific schools and could lead students to choose a school for its ranking rather than its curriculum. Getting that information to students has been a daunting task.
"Key parts of the President Obama's college ranking proposal, such as tying federal aid to institutional performance and modifying the single disbursement rule, will require an Act of Congress," said Mark Kantrowitz senior vice president and publisher of Edvisors Network, a Website that tracks student loans. "That may not happen in the current divided Congress. He can, however, improve the current disclosures on his own."
So could Congress. The 2013 Know Before you Owe Act of 2013, introduced by Senators Dick Durbin (D-Ill.) and Tom Harkin (D-Iowa) last March, is a step in the right direction. It would require colleges to inform students about their eligibility for federal financial aid and disclose terms and conditions. Schools would also have to inform students of a private loan's impact on their eligibility for other forms of financial aid and their right to accept, reject or cancel a private loan in certain circumstances.
The Act did not pass the senate during the last session, but may have a second life in next or become part of a reauthorization of Higher Education Act, for which senator Harkin has been an advocate.
"The Know Before You Owe Act, or at least some provisions of it do have a chance of being reintroduced as part of the Higher Education Act's reauthorization, especially loan disclosures, because there is an effort to increase transparency," Laura Pereyra, San Francisco-based analyst for NerdWallet, a Website that tracks consumer products. "The Consumer Financial Protection Bureau is keeping an eye on student loans through the Know Before You Owe Project's College Shopping Sheet hosted in conjunction with the Department of Education. Multiple schools have decided to cooperate with the CFPB and the Department of Education to give better and simpler information to students on how to reduce their student loans."
Under this proposed law, schools would be required to confirm students' enrollment status, cost of tuition and estimated federal financial aid before the private student loan is approved. NerdScholar, an adjunct of NerdWallet, found that this type of certification decreased default rate in 30% of the cases.
Durbin and Harken introduced a second bill, the Fairness for Struggling Students of 2013, which would treat private student loans in bankruptcy the same as other types of private debt and would, in effect, roll back some provisions of the 2005 Bankruptcy Act, allowing private loans to be discharged due to economic hardship.