Washington State Senate Passes Bill to Increase Transparency for Student Loan Borrowers
A bill that would provide student loan borrowers with more transparency passed in the Washington State Legislature last week, with the bipartisan legislation getting a unanimous vote by the Senate.
Called the Student Loan Transparency Act, Senate Bill 5022, which was co-sponsored by Republican and Democrat lawmakers in the state, calls on colleges and universities in Washington to give student loan borrowers detailed notices about their loan balances and forecasted monthly payments whenever a student gets a financial aid package that has a new or altered student loan. The notice also needs to provide students with information as to how they can access resources for student debt holders. “Student borrowers deserve clear and accurate information to navigate an often confusing process that often leaves them indebted for decades. This legislation helps address these challenges,” said Bob Ferguson, the Attorney General in Washington that came up with the bill.
According to a press release from Ferguson’s office, the bill is modeled after legislation in Indiana, Wisconsin, and Nebraska designed to give student loan borrowers more information about their debt. The idea is if students are informed about the cost of borrowing and how much they will owe upon graduation, then they may choose cheaper alternatives or prepare better to pay down the debt. Indiana’s law was put on the books after increased transparency on student loans proved to make a difference.
In the same press release, Ferguson noted that in the 2012-2013 school year Indiana University sent student borrowers annual loan statements which resulted in undergraduate borrowing declining by nearly 16 percent over the course of two years. In addition to its own awareness program, the University of Indiana offers its student borrowers extensive financial literacy resources, and it provides incentives to spur students towards a timely graduation, all of which supposedly play a role in reducing student debt.
In line with the actions taken in the Washington State senate, lawmakers in the state of Indiana are also aiming to boost transparency state wide, introducing a bill last month dubbed the Letter of Estimated Annual Debt for Students (LEADS) Act. It would require colleges and universities that accept federal financial aid to send letters to student loan borrowers with an estimate on total student loan debt as well as projections for what they will owe each month in the future.
“There are serious long-term effects of student debt,” Republican Senator Barbara Bailey said in Ferguson’s press release. “The more information that our college students have about their financing options the better. The Student Loan Transparency Act will help students make better decisions about their educational-financing needs.”
To say student loan debt is a big problem in the U.S. would be an understatement. The nation collectively owes more than $1.4 trillion in student loan debt with the average borrowing having to pay back $28,000. The debt load has precluded people from buying homes, starting businesses, and saving for retirement. In the state of Washington, home to top universities such as Northwest University, things are a little better than the national average. According to recent data from LendEDU, college graduates in Washington owe an average of $24,997 in student loans with 56% of college graduates taking out at least one loan. One might assume that the legislative actions taken by the Washington State Senate are coming in the nick of time before their student debt situation gets worse.