Informed Student Borrowing Act of 2023

Informed Student Borrowing Act of 2023

This bill revises and expands loan counseling for borrowers of federal student loans.

Specifically, the bill requires an institution of higher education (IHE) that participates in federal student aid programs to provide loan counseling to a student borrower of a federal student loan at the first disbursement of a loan in each award year. Currently, an IHE must provide one-time entrance counseling to a student who is a first-time federal student loan borrower.

The bill also revises and expands required elements of loan counseling. For example, required elements of loan counseling must include (1) an explanation that the borrower must affirmatively determine and manually enter the federal loan amount that the borrower will borrow for each award year, and (2) sample monthly repayment amounts based on the standard repayment plan and the most commonly used income-driven repayment plan.

Each IHE must ensure that student borrowers and parent borrowers manually enter the exact dollar amount of the loan that they wish to borrow for the year.

If an IHE provides a student or prospective student with a financial aid award notification that includes funds under the Federal Work-Study Program, then the IHE must ensure that the notification includes an explanation that these funds are not directly awarded to the student or IHE and that such amounts must be earned through the student's completion of work over time.

Bill 118 HR 4616, also known as the Informed Student Borrowing Act of 2023, aims to provide students with more information and resources to make informed decisions about borrowing for higher education. The bill requires colleges and universities to provide students with personalized information about their student loans, including the total amount borrowed, estimated monthly payments, and potential future earnings based on their chosen field of study.

Additionally, the bill mandates that schools offer financial literacy counseling to students before they take out loans, to ensure they understand the implications of borrowing money for their education. This counseling would cover topics such as budgeting, loan repayment options, and the importance of managing debt responsibly.

Furthermore, the Informed Student Borrowing Act of 2023 requires schools to disclose their cohort default rates, which show the percentage of students who default on their loans within a certain timeframe. This information can help students assess the financial risk associated with attending a particular institution. Overall, this bill aims to empower students to make more informed decisions about borrowing for higher education, ultimately helping them avoid excessive debt and better manage their finances after graduation.