Every year, I hold at least one meeting in each of Iowa’s 99 counties. Many of these meetings are at schools, and the number one concern among students is student loan debt. They have every reason to be worried.
Over 44 million Americans currently hold more than $1 trillion in student loan debt. Seventy percent of college students graduate with substantial loans. In fact, the average college senior graduates with more than $28,000 in student loan debt. In Iowa, the average is even higher at nearly $30,000.
Student loan debt is now the second-highest consumer debt category; second only to mortgage debt. College graduates who borrowed loans are spending approximately one-fifth of their annual salaries on loan repayment, and the high price tag and heavy burden of student debt is keeping America’s young people from buying homes and starting families. This is bad for individuals, bad for the economy and bad for the future of this country.
The problem of student debt is multifaceted. One issue is that it’s difficult for students and families to determine exactly how much tuition will cost. Although there are net price calculators online that help provide students with information on what their individualized costs would be, they’re often difficult to find, use and compare.
Last month, I introduced the bipartisan Net Price Calculator Improvement Act, which would help solve the problem by requiring academic institutions to place net cost calculators in high-traffic areas of their websites where students would be searching for cost and admissions information.
The bill would also authorize the Department of Education to develop a "universal calculator" that would enable students to answer one set of financial and academic questions when trying to calculate the cost of multiple colleges.
Another challenge for students is navigating complicated financial aid forms. Different forms, many of which have different terminology, abbreviations and acronyms to describe different kinds of financial aid, are confusing and time consuming.
This can lead to students not understanding how much of the aid offered is loans that have to be repaid and how much is grants that actually reduce out-of-pocket costs to students. The process needs to be simplified so that students and their families can easily compare schools and know exactly what each will cost.
That’s why I introduced the bipartisan Understanding the True Cost of College Act. The bill would require colleges and universities to use a uniform financial aid offer form that clearly states information such as the cost of attendance, the amount of grant aid awarded and the net amount a student is responsible for paying, among other things.
Obtaining a post-secondary education can open doors of economic opportunity and prosperity for the next generation. But when students borrow more money than they need, it’s easier for them to slip into deep student loan debt. Unlike bank loans, federal student loans are given out without regard to ability to repay and there are few checks in place to make sure students are not borrowing more than they absolutely need.
Based on best practices I’ve learned about in Iowa, I’ve introduced the bipartisan Know Before You Owe Federal Student Loan Act to help solve this problem. This bill would empower students to become smarter borrowers. It would improve student loan counseling services and require colleges to ask students how much they want to borrow instead of the maximum amount available being the default. It would provide students with information comparing their likely monthly income after expenses with their likely student loan payment so they can make smart decisions on the front end and start their professional lives on the right foot.
Ultimately, it’s up to students and their families to be smart consumers of education. It takes patience and diligence to research schools and decide which one will be the best fit for a student’s long-term goals. But the process doesn’t have to be as difficult as it currently is.
These bills would make the experience simpler and more transparent and would help college-bound students become good stewards of their money and smarter borrowers. Also, by empowering students and parents to be smart shoppers, it will enhance the incentive for colleges to hold down costs. Less student debt means a brighter future for students, and in turn, a brighter future for the nation.