The Obama Administration, in the interest of clarity and transparency, rolled out its new easy-to-understand financial aid form on July 24. The federal government is urging colleges and university to adopt the new “shopping sheet” for the 2013-2014 school year.
Financial aid ‘shopping sheet’
The new form will allow potential students and their parents to make more informed decisions regarding student loans. The “shopping sheet” lists the various options available to chose from in the way of loans. It also offers comparative, side-by-side information on estimated payments, annual costs and the default rate of student loans. In addition, the one-page form gives estimates of the costs of tuition, books, housing and transportation.
U.S. Secretary of Education Arne Duncan said to the press:
“So many students I meet across the country don’t really understand how much debt they are in until the first bill arrives, and that’s far too late and simply not fair. This is an easy-to-use form that standardizes information parents use to make smart educational choices and makes the true cost of higher education far more transparent.”
Part of CFPB reform efforts
The new form was created in cooperation with the Consumer Financial Protection Bureau, as part of its efforts to reform and regulate the nation’s financial services industry. According to the bureau, there are currently more than $1 trillion in outstanding student loans in the U.S. Further, the amount of defaulted student loans has climbed to more than $8 billion.
Schools not obligated to use form
Duncan said he will be urging the nation’s colleges and universities to adopt the form. The institutions, however, are under no legal obligation to do so. In spite of that, the Education Department announced in June that 10 universities have agreed to switch to financial aid forms providing similar information.
Largest source of unsecured debt
According to the Education Department and the Consumer Financial Protection Bureau, risky lending practices caused private student loans to mushroom from $5 billion in 2001 to more than $20 billion is 2008. Since then, the financial crisis and tightened lending standards have caused the market to recede. Nonetheless, student loans now surpass credit cards as the nation’s largest source of unsecured debt.
Most educated nation by 2020?
Meanwhile, President Obama continues to urge the states to lower the cost getting educated as part of his goal to make the United States the country with the highest percentage of college graduates by 2020.