Assembly Passes Bill Providing Students Important Information on Private Loans
SACRAMENTO – Legislation by Senate Majority Leader Ellen M. Corbett (D-San Leandro) requiring colleges and universities to provide basic information about private loans to students so they can make better decisions about financing their educations passed the Assembly today.
“There is growing concern across the country about rising student debt and how this burden affects students after they are done with school,” Corbett said. “This bill provides students with important information about private loans, so they can better assess the total costs of borrowing for college and which loans would work best.”
Students are borrowing twice what they did a decade ago and taking on larger amounts of debt. The average debt of students who graduated in 2010 is $25,250. Federal and private student-loan debt is approaching $1 trillion and has surpassed both auto-loan and credit-card debt.
Senate Bill 1289 requires colleges and universities to provide basic information about private loans on financial aid materials and clearly distinguish between private and federal loans in financial aid packages offered to students. For instance, federal loans offer income-based and income-contingent repayment options and other flexibility, based on need, that private loans generally do not.
In addition to requiring institutions to provide students preliminary information on private loans, the bill also directs institutions to inform students who are awarded private loans about whether the interest rate is fixed or variable and how the student’s credit rating may impact the rate.
Current federal statute, under The Truth in Lending Act, requires lenders to disclose to perspective applicants much of the information about private loans included in SB 1289, but that only applies to lenders and academic institution that provide institutional loans to students. SB 1289 helps eliminate the confusion students and their families face when deciding on student loans.
Contact: Andrew LaMar, (916) 651-4010