Prepared Remarks by Richard Cordray in a Press Call About the “Financial Aid Shopping Sheet”
Director of the Consumer Financial Protection Bureau
Press Call with Education Secretary Arne Duncan
“Financial Aid Shopping Sheet”
July 23, 2012
The cost of higher education has skyrocketed. Being able to afford a college degree is difficult. Borrowing for school is a reality of life.
In this country, outstanding student loan debt has now crossed the $1 trillion mark. Student loans have eclipsed credit cards as the leading source of U.S. household debt outside of mortgages. This is a major issue for students, recent graduates, and their families.
Based on a report that Secretary Duncan and I sent to Congress a few days ago, the private student loan burden on families is particularly troublesome. There are now more than $8.1 billion in defaulted private loans, and even more in delinquency.
The bottom line is that no consumer should take on a large amount of debt without understanding the costs and the risks. Too often students receive financial aid award letters that are laden with jargon, use inconsistent terms and calculations, and make it unnecessarily difficult to compare different financial aid awards side-by-side.
At the Consumer Bureau, we have heard from thousands of student loan borrowers who say that they simply did not understand what they signed up for. Many of them chose private student loans before exhausting their cheaper federal loan options, which would have offered them more protections if they run into trouble. Some resorted to other high-priced loans, like credit cards. All too often, borrowers got in way over their heads.
Students need to know how much their loans are ultimately going to cost when all the interest and fees and other costs are factored into the equation. We are standing up for a simple and sensible concept: Students should know before they owe.
The “Financial Aid Shopping Sheet ” gives college-bound students what they have been craving: real numbers and a format that makes sense of a huge financial undertaking that too often is confusing and daunting to borrowers. This form, which presents a model of what all financial aid award letters should be, would provide a uniform way to inform potential students of their true college costs – before they commit to a school.
The form lays out what is a loan and what is a scholarship. It lays out the total cost of attendance including tuition, fees, and other expenses. It details options for federal aid. The form can help students understand how much debt they may have after graduation and what their monthly payment could look like. And in doing all of this, it enables prospective students to compare one college offer to another.
The Financial Aid Shopping Sheet is a simple, common-sense form, and we are very proud to say that it is the result of a strong collaborative effort with the U.S. Department of Education.
In April, President Obama signed an executive order requiring colleges that accept Tuition Assistance and G.I. Bill money to provide military students with the Financial Aid Shopping Sheet . Then in June, universities representing more than a million students committed themselves to providing this essential financial information to all of their incoming students. This momentum is very promising. So we urge all universities and higher education institutions to embrace transparency by adopting the Financial Aid Shopping Sheet , and fully expect that they will do so.
At the Consumer Bureau, our goal across the various consumer finance markets is to give people confidence and greater peace of mind that the financial world is not full of hidden tricks and traps that will ruin their lives. We want information to be clear and easy to understand so that consumers can make informed financial decisions that best serve themselves and their families.