Published: June 2013

Students should know before they owe

If Congress and the Administration fail to act by July 1, 2013, the interest rate on new federal Stafford subsidized loans will double from 3.4% to 6.8%. Consumer Action and coalition advocates are concerned that the doubling of interest rates during a period of record-low market interest rates will lead to a significant increase in students mistakenly turning to costly and risky private loans to pay for higher education.

In a letter to the Consumer Financial Protection Bureau, Consumer Action joins organizations representing students, consumers, higher education institutions, civil rights groups and public policy organizations in supporting the Know Before You Owe Private Student Loan Act of 2013 (S. 113). We believe the Bureau has the authority under TILA to require school certification and counseling before private education loans are disbursed and should do so now.

Requiring school certification means that lenders will not disburse private education loans unless the school has confirmed that the student is enrolled, how much they are eligible to borrow, and that they have been informed of any untapped federal aid eligibility and the important differences between federal and private loans. The most recent available data show that half of all undergraduates who took out private loans could have borrowed more in safer federal loans.

Lead Organization

The Institute for College Access & Success (TICAS)

Other Organizations

American Association of Collegiate Registrars and Admissions Officers American Association of Community Colleges | American Association of State Colleges and Universities | American Association of University Women | American Federation of Teachers Americans for Financial Reform Association of Community College Trustees Center for Responsible Lending | Consumer Action | Consumers Union | The Education Trust | Higher Education Policy Institute | Hispanic Association of Colleges and Universities | The Institute for College Access & Success NAACP | National Association for College Admission Counseling | National Association of Social Workers | National Black Law Students Association | National Consumer Law Center (on behalf of our low-income clients) | National Consumers League | National Education Association | New Economy Project (formerly NEDAP) | New York Public Interest Research Group | Public Citizen | Rock the Vote | United States Public Interest Research Group United States Students Association Woodstock Institute | Young Invincibles

More Information

For more information please visit TICAS online.

Download PDF

Students should know before they owe   (6_17_13CordrayLetterFINAL.pdf)

 
 

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