U.S. Sen. Joni Ernst (R-IA) cosponsored legislation to require that the annual percentage rates (APRs) for federal student loans are disclosed, giving Americans better information related to the associated costs of higher education.
“Over 90 percent of student loans are originated and guaranteed by the federal government,” Sen. Ernst said. “It’s critical that prospective students and their families have access to necessary information about these loans when considering their lending options, and that’s exactly what this bill does.”
Sen. Ernst on Jan. 28 introduced the Transparency in Student Lending Act, S. 234, which is sponsored by U.S. Sen. Mike Enzi (R-WY).
“Borrowers of federal student loans need transparent information when considering loan options and federal student loans should have to be upfront about their true costs,” Sen. Enzi said. “This bill would provide more transparency so families can be better informed about their financing options.”
The same-named companion bill, H.R. 811, was introduced the same day in the U.S. House by U.S. Rep. John Curtis (R-UT).
“As our global economy grows ever more competitive, education is key. Unfortunately, costs — including hidden costs — can be crippling,” Rep. Curtis said. “As the primary provider of the vast majority of student loans and education financing options, the federal government should provide a transparent and full accounting of associated costs and fees for borrowers.”
The APR is a single percentage number that represents the actual yearly costs of funds over the term of the loan and takes into account the stated interest rate of the loan and any fees or additional costs associated with the loan, according to Sen. Ernst’s statement.
Put another way, the APR is an annualized representation of an interest rate, according to Bank of America. When deciding between student loans, for instance, the APR can help borrowers compare how expensive a transaction would be on each one, the bank says.
Currently, borrowers of private student loans receive APR information, but student loans issued by the U.S. Department of Education don’t provide such information, the lawmakers said.
The Consumer Bankers Association, the Education Finance Council, and the Utah Higher Education Assistance Authority support the measure, according to Sen. Ernst.
S. 234 has been referred for consideration to the U.S. Senate Health, Education, Labor, and Pensions Committee, while H.R. 811 is under review by the U.S. House Education and Labor Committee.