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Prepared Remarks by Richard Cordray
Director of the Consumer Financial Protection Bureau
Launch of the Financial Aid Comparison Shopper
Sioux Falls, South Dakota
April 11, 2012
Thank you and it is a pleasure to be here in Sioux Falls. I want to thank Chairman Johnson for inviting me to meet his constituents, for whom he advocates so well. I also thank him for his support of the Consumer Financial Protection Bureau’s disclosure and transparency efforts.
As you may know, my nomination to be the first director of the Consumer Bureau was before the Senate Banking Committee for many months. All during that time, it was reassuring to know that this man was watching over my fate, for he is respected on both sides of the aisle for his temperament and judgment. There are some positions in life where you are really glad that the person in them is firm but fair: teachers, parents, and committee chairmen. Fortunately, those words describe your own Senator Johnson.
At the Consumer Bureau, we are charged with making the consumer financial markets work for the American people. Markets work best when consumers have all the information they need to make the best decisions for themselves and their families.
Through our series of Know Before You Owe initiatives, we have worked hard to help consumers make smarter choices. From our simplified mortgage disclosure form to the college financial aid letter we worked with the Department of Education to conceptualize, these projects seek to provide consumers with greater understanding of the benefits and risks posed by financial products and to help them choose the product that works best for them.
So today I am pleased to announce our next Know Before You Owe initiative on student loans – the beta release of our Financial Aid Comparison Shopper. This new tool is an interactive, online platform designed to help families decide how much to borrow for higher education.
Choosing a school is a big responsibility – one that is too often made difficult by an inability to determine the impact of student loan debt. Our Financial Aid Comparison Shopper removes a lot of guesswork from the equation, enables students to compare financial offers side by side, and gives them the important information they need to know before they owe.
April is the peak time when colleges and other schools send out their letters of acceptance. About 1.5 million students will sift through 5 million letters this year. But acceptance does not end the process. For millions of American families, they also need to determine how to make ends meet when it comes to paying for higher education. For these families, it can be difficult to understand the costs, to evaluate loan options, and to figure out how much debt to take on when financial aid information is jargon-filled and usually unique to the institution sending it.
The Financial Aid Comparison Shopper helps families make smarter choices by allowing parents and students to take the information they already have, along with data compiled by the federal government, and leverage it. The idea is to obtain personalized, direct comparisons of the costs of attendance for each school in a clear, easy-to-understand presentation.
Many parents feel pressure to send their child to the “best school” possible, often making this decision based on rankings and other factors that discount the actual cost of an education. The Financial Aid Comparison Shopper can help families talk about their options and consider these costs and risks in terms that are more immediate and easy to understand.
Our tool will show students their monthly payment at graduation and it will help students weigh the burden posed by their projected debt load, based on the nationwide average starting salary of a new graduate.
We know that putting student loan debt into context is particularly important for students and parents. Since we opened our doors last year, we have asked consumers to tell us their stories. Thousands of student loan borrowers have responded, telling the Consumer Bureau that they wish they would have known much more than they did about how their student loan debt would affect them for the rest of their lives. Indeed, some people, we have come to learn, are still paying off their student loans decades later.
Figuring out how to finance an education can be daunting. Some students, not knowing any better, choose private loans before exhausting federal loan options that may have more favorable features and are often cheaper. Some families resort to credit cards and other high-priced debt products rather than taking out federal student loans. And all too often, students and families simply take on more debt than they can afford.
Recently, the Consumer Bureau 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. In part, it is because people are having a harder time paying down their outstanding debt. But it is also because tuition and average debt levels have increased over time.
For every dollar borrowed to pay for further education, students and parents may end up repaying two dollars or more, depending on the choices they make today. The Financial Aid Comparison Shopper is one of the ways we are empowering consumers to take control over their economic lives by better understanding the impact of their choices before they make them.
In addition to providing immediate help for parents and students weighing their financing options, the beta release of this tool provides the public with the chance to tell us how we can do this better. We will use public feedback to inform the development of a more robust Financial Aid Comparison Shopper and to help us better serve people through other similar initiatives.
We look forward to continuing our work to provide the tools and information that people need to make sound financial decisions – and to make sure borrowing for higher education is the best investment they ever make. As Robert Kennedy once said, “Education is the key to jobs – to income – to human dignity itself.” We want that key to be within reach for American families. Thank you.
The Financial Aid Comparison Shopper is available here: www.consumerfinance.gov/payingforcollege