Full Disclosure for Student Borrowers
A spot-on NYT editorial, following up on the recent article I sent around on more and more college students getting saddled with huge debts:
Federal law requires schools to provide students minimal "entry" and "exit" loan counseling. Melanie K. Weaver, the director of financial aid at Ohio Northern, told The Times in an e-mail message that parents and students needed to monitor debt, adding, "it is difficult for our office of 10 staff members to stay on top of every student."
That answer is unacceptable.
Many schools market themselves to students without explaining the real costs of attendance. Letters informing them about financial aid awards often blur the distinction between loans and grants to make the school look like a better deal than it is. And once students enroll, they are generally left on their own as they borrow year after year.
The Obama administration has taken some important steps to address these problems. A proposal would require colleges to clearly disclose costs in a standardized "shopping sheet" that would let students see the aid they are receiving and the debt that they would incur. Later this year, it plans to post an Internet "scorecard" that rates each college nationally on affordability and value — defined by graduation rates and whether graduates earn enough on average to repay their debts.
A bill pending in the Senate would require both colleges and lenders to educate students about the differences between federal loans and riskier, more expensive private loans — and their borrowing options. Congress should also require schools to provide in-depth, annual loan counseling to students and set criteria for the information that must be provided. All schools should be required to disclose annually the average debt load of their graduates.
Before students borrow to pay for their education, they need to understand the obligations they are taking on, and how long it will take to pay them off.
May 22, 2012