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Know Before You Owe Federal Student Loan Act of 2023
12/15/2023, 3:55 PM
Summary of Bill HR 1216
Additionally, the bill mandates that students complete a financial counseling session before receiving a federal student loan to ensure they understand the financial commitment they are making. This counseling session will cover topics such as budgeting, loan repayment strategies, and the importance of making timely payments.
Furthermore, the bill requires the Department of Education to create a user-friendly online tool that allows students to compare different loan options and understand the long-term financial implications of taking out a loan. This tool will help students make informed decisions about their borrowing and repayment options. Overall, the Know Before You Owe Federal Student Loan Act of 2023 aims to empower students to make informed decisions about their education financing and reduce the risk of students taking on more debt than they can afford. By providing clear and comprehensive information about federal student loans, this bill seeks to protect students from financial hardship and ensure they have the resources they need to succeed in their academic pursuits.
Congressional Summary of HR 1216
Know Before You Owe Federal Student Loan Act of 2023
This bill expands lender disclosure requirements and revises loan counseling requirements.
First, the bill requires a lender to provide a quarterly statement to a Federal Family Education Loan or Direct Loan borrower during a period when loan payments are not required. The statement must include specified information on the loan and interest amounts and explain the option to pay accrued interest while in deferment or forbearance.
In addition, the bill requires an institution of higher education (IHE) that participates in federal student-aid programs to provide pre-loan counseling to a student borrower of a federal student loan upon or prior to the first disbursement of each new loan. 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 pre-loan counseling to include an estimate of the borrower's monthly payment amount compared to the borrower's estimated monthly income after taxes and other expenses, a statement to borrow the minimum necessary amount, a warning that a high debt-to-income ratio makes repayment more difficult, options to reduce borrowing, and an explanation of the importance of on-time graduation.
Prior to certifying a Federal Direct Loan disbursement to a student, an IHE must ensure that the student manually enters the exact dollar amount of the loan.
