Banks, Cleaver, Scott, Manchin reintroduce bipartisan legislation to modernize, simplify student loan forms

WASHINGTON – This week, U.S. Representatives Jim Banks (R-IN) and Emanuel Cleaver, II (D-MO), along with U.S. Senators Tim Scott (R-SC) and Joe Manchin (D-WV), reintroduced the Student Loan Disclosure Modernization Act to ensure student borrowers have a clearer understanding of terms and conditions before signing a loan agreement. Specifically, the bipartisan legislation would simplify the Department of Education’s Plain Language Disclosure Form to place a greater emphasis on the material terms of the loan.

Jim Banks

“Young students often just out of high school are expected to make financial decisions that will affect them for decades, and they deserve a simple explanation of their obligations when they do. I’m proud to join Rep. Cleaver in reintroducing this bipartisan, common-sense proposal that will increase transparency in our higher education system,” said Rep. Banks.

Emanuel Cleaver

“I’m proud to once again join Congressman Banks to reintroduce this bipartisan, common-sense legislation to update and simplify the Plain Language Disclosure Form so that American students of all ages and backgrounds have a greater understanding of the long-term financial ramifications of these loan agreements. Far too many students sign these forms without the legal or financial expertise necessary to fully comprehend what they are signing up for—only to realize once they leave school they owe much more than they thought. This legislation is about serving students and ensuring they don’t unknowingly enter into an agreement that is going to hamstring their financial future,” said Rep. Cleaver.

Joe Manchin

“Right now, federal student loan disclosure forms are complicated, lengthy, and filled with unhelpful legal jargon. But these disclosure forms are vital because they outline the costs and terms of potential loans, which is critical in order for students and families to understand what they’re borrowing. Our bipartisan bill would simplify the student loan disclosure form while also providing personalized information on the amount students and their families are borrowing, and even an estimate for how much they may owe per month after graduating. I urge my colleagues on both sides of the aisle to support this commonsense legislation that increases transparency and empowers student loan applicants to be responsible borrowers,” said Senator Manchin.

Tim Scott

“Loan transparency and financial literacy is a bipartisan issue – in South Carolina alone, 60 percent of graduates face student debt after finishing their degree. By giving those seeking higher education more tools to see what their student borrowing really means, we can remove some of the uncertainty that they face after graduation,” said Senator Scott.

The national student loan debt currently stands at nearly $1.6 trillion. In 2018, 69 percent of college students took out loans, graduating with an average debt of $29,800 – both private and federal debt. Furthermore, 14 percent of parents took out Federal Parent PLUS loans. 

For many Americans, a student loan is the first introduction to taking out loans, and many college students are unprepared for the reality of student loan debt. According to a 2016 Consumer Report Survey, 62% of Americans with student loan debt did not attend any financial aid information sessions prior to enrolling in college. By simplifying the Plain Language Disclosure Form, we can empower students to better understand the decisions they are making about their financial future and prevent over-borrowing, which hinders economic growth in the future.

The Student Loan Disclosure Modernization Act would:

  • Require the Plain Language Disclosure Form to be simplified and consumer tested;
  • Place extra emphasis on material terms of the loan like the finance charge, annual percentage rate (APR), and estimated monthly repayment; and
  • Require students to sign the form every time they take out a new loan, acknowledging that they have read the form and understand the terms of the loan.

Official text of the Student Loan Disclosure Modernization Act is available here.