This bill would seek to improve the financial counseling received by students taking out loans for their education. Annual financial aid counseling would be required for all borrowers in addition to students receiving Pell Grants, and the Dept. of Education would be required to make this counseling tool available online.
Each year, both students and parents — or whoever is doing the borrowing — would be required to go through interactive counseling that reflects their personal borrowing situation each year. The counseling would provide an awareness about the financial obligations students and parents are accumulating, and require them to consent each year before accepting federal student loans. Financial aid exit counseling would also be provided when the student concludes their education to inform the student about repayment options, grace periods, and forbearance.
The Dept. of Education would be required to begin a longitudinal (over multiple years) study about the effectiveness of student loan counseling in improving student performance in the following categories:
Successful entry into student loan repayment;
Cumulative borrowing levels;
Other factors that the Secretary of Education may determine.
No new funds would be made available for implementing this legislation if it’s enacted, as the Dept. of Education would be able to use $2 million in funding it has already been given to use on maintaining its financial aid counseling tool.
The Dept. of Education does currently require students and parents to go through counseling and sign a promissory note before accepting federal student loans, but it is less involved than what would be offered under this bill. For example, this bill would require a signature to accept each loan during the course of a year, and counseling is currently only required before the student accepts their first loan rather than each year.