Consumers Union Issues Report on How to Improve Student Loan Disclosures and Counseling

As Congress debates legislation to overhaul student loan programs, Consumers Union, the nonprofit publisher of Consumer Reports, released a report finding that many students and parents don't have access to the information they need to determine the best way to pay for college. The report, funded by The Pew Charitable Trusts, offers policy recommendations to help families find the most affordable options for paying for college.

"Financing a house or a car can be confusing, but it's nothing compared with trying to pay for a college education," said Jim Guest, President of Consumers Union. "Families need access to clear and unbiased information to help them make smarter choices about how to pay for school."

The report is particularly timely given recent investigations by the New York Attorney General and others documenting how some financial aid offices have received kickbacks and other gifts from lenders and recommended lenders even if they are not the best choice for students. The U.S. Senate Health Committee issued a report in June concluding that illegal student loan marketing activities are "systemic and cannot be isolated to a few 'problem' lenders or schools."

Consumers Union conducted market research in five metropolitan areas with over 130 students and parents to identify common challenges families face navigating the college financing system. Their research showed that students and parents often could not identify the best-priced loan, or understand how loan repayment obligations can affect their future choices when shown information currently used by colleges and universities, lenders, and the Department of Education. Using feedback from consumers and financial aid experts, Consumers Union developed practical policy recommendations to improve student loan counseling and loan disclosures, including:

  -- Requiring colleges to use the same definitions and formats in financial
     aid award letters to disclose the cost of attendance, the financial aid
     offered, and the costs associated with various types of loans.

  -- Requiring lenders to provide -- in plain language -- the rates and
     terms of a private educational loan earlier in the application process
     so that families can shop around for the best-priced loan.

  -- Requiring that students receive annual financial aid counseling before
     loan funds are disbursed, rather than just at the beginning and end of
     college.

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer.

Source: Consumers Union

Web site: http://www.consumersunion.org/