California Lawmaker Proposes Giving Students Better Information about Debt
Before making decisions about college, consumers ought to be armed with information about costs, outcomes, and debt. Nutrition labels tell us what we’re putting into our bodies; the Kelley Blue Book helps buyers find a fair deal on a car; and medicines warn patients about potentially dangerous side effects. Students also need basic consumer information to help them decide where to go to college and how to pay for it, including how much they are likely to end up having to borrow and the types of loans available to them. Unfortunately, these critical facts aren’t available for all California schools.
California Assembly Bill 721, introduced by Assemblymember Jose Medina, would help to ensure that students have clear and comparable information about student loans and debt, so they can decide where to enroll and how to pay for it. Specifically, AB 721 would require California colleges to do the following:
- Annually calculate and disclose college graduates’ debt at graduation. For the class of 2013, colleges representing 89% of bachelor’s degree recipients from public and nonprofit schools in the state voluntarily calculated and reported these figures – including all University of California campuses, most California State University campuses, and many nonprofit colleges. But, while for-profit colleges have the highest average borrowing and debt levels, only one in California reported its graduates’ debt. Requiring colleges to disclose their graduates’ loan debt will improve transparency for students and oversight for policymakers.
- Ensure that institutions do not certify students’ requests for private loans before informing them about untapped federal aid eligibility. Experts agree that federal student loans, which offer key consumer protections including low, fixed interest rates, income-driven repayment plans, and public service loan forgiveness, are by far the safest way to borrow. But almost half (47%) of private loan borrowers nationally borrow less than they could in safer federal student loans.
- Require institutions that do not participate in the federal loan program to disclose that they do not offer federal loans. At least 22 California community colleges enrolling more than 250,000 students do not offer federal loans, which can lead students to turn to riskier options like private loans, working excessive hours, reducing college credits, or dropping out altogether. At many non-participating colleges, it is not apparent to students that federal loans are unavailable until they need one.
We commend Assemblymember Medina for authoring this important, common-sense legislation in California, where more than one in eight U.S. undergraduates go to college. And we urge other state and federal lawmakers to follow suit.