Bill Overview
Title: Know Before You Owe Federal Student Loan Act of 2022
Description: 2022 This bill expands lender disclosure requirements and revises loan counseling requirements. First, the bill requires a lender to provide a quarterly statement to a Federal Family Education Loan or Direct Loan borrower during a period when loan payments are not required. The statement must include specified information on the loan and interest amounts and explain the option to pay accrued interest while in deferment or forbearance. In addition, the bill requires an institution of higher education (IHE) that participates in federal student-aid programs to provide pre-loan counseling to a student borrower of a federal student loan upon or prior to the first disbursement of each new loan. Currently, an IHE must provide one-time entrance counseling to a student who is a first-time federal student loan borrower. The bill also revises and expands required elements of pre-loan counseling to include an estimate of the borrower's monthly payment amount compared to the borrower's estimated monthly income after taxes and other expenses, a statement to borrow the minimum necessary amount, a warning that a high debt-to-income ratio makes repayment more difficult, options to reduce borrowing, and an explanation of the importance of on-time graduation. Prior to certifying a Federal Direct Loan disbursement to a student, an IHE must ensure that the student manually enters the exact dollar amount of the loan.
Sponsors: Rep. Miller-Meeks, Mariannette [R-IA-2]
Target Audience
Population: Federal student loan borrowers and college students in higher education institutions
Estimated Size: 43000000
- The bill impacts federal student loan borrowers who are enrolled in higher education institutions (HEIs).
- There are approximately 43 million student loan borrowers in the United States, who collectively owe over $1.7 trillion in student loan debt.
- The bill's impact is limited to those students eligible for federal student loans, which represents a significant portion of college students in the U.S.
- The bill includes provisions that affect both borrowers of Federal Family Education Loans (FFEL) and Direct Loans, which cover a substantial share of federal student loans.
- The global estimate should be considered mainly in the context of countries or regions with loan structures, even though the specific U.S.-focused aspects do not directly translate globally.
Reasoning
- The policy focuses on improving transparency and understanding among student loan borrowers, potentially reducing the likelihood of excessive borrowing and unmanageable debt post-graduation.
- Simulations include varied demographics to encompass a broad spectrum of university populations who might borrow federal student loans.
- The policy could have a high impact on new students but less on those who have been through the loan process, as previous experiences might have already informed them.
- The inclusion of pre-loan counseling across multiple loans instead of just the first time means ongoing students might experience repetitive information, affecting engagement.
- Budget considerations focus on the communication and creation of educational materials for counseling, which could be a significant investment upfront.
- Policy's effectiveness depends on proper implementation by institutions and willingness of students to engage with the counseling processes.
Simulated Interviews
Student (Chicago, IL)
Age: 20 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 5/20
Statement of Opinion:
- I think more information is always helpful. I didn't know much about loans when I first started.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 8 |
Graduate Student (Austin, TX)
Age: 23 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- It's good to know what I'm getting into before adding more debt. I'm already worrying about my undergraduate loan.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 6 |
Alumni, Currently Employed (New York, NY)
Age: 31 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 0.0 years
Commonness: 3/20
Statement of Opinion:
- I wish this had been around when I was a student. It might have helped me manage better from the start.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 4 |
| Year 2 | 4 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 5 | 4 |
| Year 10 | 5 | 4 |
| Year 20 | 5 | 4 |
Student (Columbus, OH)
Age: 18 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 4.0 years
Commonness: 4/20
Statement of Opinion:
- Having to enter the exact amount makes me nervous but better prepared.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Unemployed (San Francisco, CA)
Age: 25 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 2/20
Statement of Opinion:
- Pre-loan counseling should include non-traditional paths. I'm older and switching careers.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 6 |
Doctoral Student (Boston, MA)
Age: 29 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 2/20
Statement of Opinion:
- This seems redundant since I've been in the loan process multiple times already.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 6 |
Recent Graduate (Atlanta, GA)
Age: 22 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- I'm glad they're making terms clearer for future students. Too late for me but will help others.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Student (Miami, FL)
Age: 19 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 6/20
Statement of Opinion:
- The counseling can help me think ahead about expenses when I transfer.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Engineering Professional (Seattle, WA)
Age: 28 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 1/20
Statement of Opinion:
- From what I've seen, students aren't always aware of their limits. Good move.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Education Consultant (Phoenix, AZ)
Age: 35 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 2/20
Statement of Opinion:
- Institutions should be making these best practices. It's a good baseline.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Cost Estimates
Year 1: $15000000 (Low: $10000000, High: $20000000)
Year 2: $14000000 (Low: $9000000, High: $19000000)
Year 3: $13000000 (Low: $8000000, High: $18000000)
Year 5: $12000000 (Low: $7000000, High: $17000000)
Year 10: $10000000 (Low: $5000000, High: $15000000)
Year 100: $5000000 (Low: $0, High: $10000000)
Key Considerations
- The initial cost to develop systems and train staff for new requirements is significant.
- Long-term benefits include potentially reduced default rates due to better-informed borrowers.
- Higher education institutions face challenges in implementing manual pre-loan counseling protocols without additional guidance.
- Potential cost savings for students through informed financial decisions are indirect and not government savings.