Give Students and Families all the Facts with the Transparency in Student Lending Act
Washington, DC — U.S. Representatives Randy Hultgren (R-IL-14), Luke Messer (R-IN-6) and David Scott (D-GA-13) have reintroduced legislation to improve the information provided about federal student loans to students and families by requiring the annual percentage rate (APR) to be disclosed. The APR helps borrowers understand the true cost of a loan so they can make good financial decisions. Current law mandates that the APR must be disclosed upfront before someone borrowing from a bank signs on the dotted line. Borrowers of loans issued by the Department of Education are not provided this information up front.
“The federal government omits the annual percentage rate when presenting the cost of a loan to young borrowers and families, doing them a gross disservice as they make plans for future payments,” said Congressman Hultgren. “The Department of Education is the largest consumer lender in the United States, and should provide the most transparent and helpful information to borrowers. Helping borrowers understand their debt obligations is an important first step to ensuring they are able to make their payments, and also helps prevent taxpayers from being on the hook for delinquent borrowers.”
“Every student should be able to make an informed decision about how to best finance their education,” said Congressman Scott. “This legislation is a good step toward increasing transparency and accessibility for students who take out federal loans to fund their higher education.”
- In 1969, the Truth in Lending Act passed Congress with the intention "to provide the American consumer with truth-in-lending and truth-in-advertising” when pursuing loans.
- In 2008, Congress applied Truth in Lending Act disclosure requirements to private, but not federal, student loans.
- Since then, federal student loans issued directly by the Department of Education—which have origination fees—have grown from a small segment of the market to more than 90 percent of originations each year.
The Transparency in Student Lending Act, H.R. 1283, aims to provide more information to consumers by requiring the disclosure of the annual percentage rate at the time of application for a federal student loan. APR is expressed as 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.