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Know Before You Owe Project to Help Families Make Smart Choices about Student Loans
WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today launched the next phase of its Know Before You Owe student loan project by releasing a beta version of the Financial Aid Comparison Shopper, an interactive, online tool designed to help families plan for the costs of post-secondary education.
The Financial Aid Comparison Shopper is available here: www.consumerfinance.gov/payingforcollege
“Student loan debt has crossed the $1 trillion mark and tuition continues to climb,” said CFPB Director Richard Cordray. “Now more than ever, students and their families need to know before they owe. Our Financial Aid Comparison Shopper helps students make apples to apples comparisons of their offers and pick the one that works best for their financial future.”
CFPB Director Richard Cordray unveiled the tool at an event in South Dakota today with Sen. Tim Johnson, Chairman of the Senate Banking Committee.
April is the peak time when colleges send letters of acceptance. Approximately 1.5 million students will sift through 5 million letters this year. But acceptance doesn’t end the process. Millions of American families also need to determine how to pay for school. Unfortunately, financial aid information is often jargon-filled and unique to the institution sending it. This can make it difficult for families to understand costs, evaluate loan options, and figure out how much debt to take on.
The CFPB kicked off the Know Before You Owe student loan project in October by working with the Department of Education on a draft Financial Aid Shopping Sheet that higher education institutions could use to present families with a uniform, easy-to-understand explanation of the total cost of post-secondary education and their options for financing it. The Financial Aid Comparison Shopper builds on that by helping students to compare the information across schools.
The beta version of the Financial Aid Comparison Shopper has more than 7,500 schools and institutions in its database, including vocational schools and community, state, and private colleges. It draws information from publicly available data provided by government statistical agencies. With the prototype, students and their families can compare the following across multiple financial aid offers:
- Estimated monthly student loan payment after graduation;
- Grant and scholarship offers;
- School-specific metrics such as graduation, retention, and federal student loan default rates; and
- Estimated debt level at graduation in relationship to the average starting salary.
The Financial Aid Comparison Shopper also includes a “Military Benefit Calculator” that can estimate education benefits for servicemembers, veterans, and their families. The calculator includes military tuition assistance and Post-9/11 GI Bill benefits.
Recently, the CFPB announced that outstanding student loan debt had crossed the $1 trillion mark. Student loans have eclipsed credit cards as the leading source of U.S. household debt outside of mortgages. In part, this is because more students are accessing higher education. But it’s also because tuition and average debt levels have increased. Last fall, to help borrowers understand their options when tackling their federal and private student loan debt, the CFPB released the Student Debt Repayment Assistant interactive tool.
The CFPB has also been working to address the challenges faced by students who take out private student loans. Until recently, private student lenders have been regulated by a patchwork of state and federal authorities. Prior to the Dodd-Frank Wall Street Reform and Consumer Protection Act, there was no federal supervisory program that covered nonbank providers of private student loans. That authority has now been given to the CFPB. Among its reforms, the Dodd-Frank Act created a student loan ombudsman to assist borrowers and review complaints. The student loan ombudsman is also responsible for examining the complaints in order to develop recommendations to Congress and other federal government agencies.
In November 2011, the CFPB published a Notice in the Federal Register asking students, lenders, servicers, schools, and other members of the public to share their experiences with the private student loan market. The CFPB received thousands of comments on this notice which will be analyzed and released later this year as part of a report to Congress on the private student loan market.
In addition, for those who are having trouble with their private student loans, the CFPB last month launched its student loan complaint system to help consumers deal with their lenders and servicers. Consumers can file complaints about any kind of student loan. While the CFPB will primarily manage the private student loan complaints, the CFPB will work closely with the Department of Education to route complaints that fall under their purview as the overseer of federal student loans.