Student Transparency for Understanding Decisions in Education Net Terms Act; STUDENT Act
Summary
The STUDENT Act aims to amend the Higher Education Act of 1965 by requiring lenders to disclose the total amount of interest that would be paid over the life of a federal student loan. This disclosure would use the standard repayment plan to calculate the total interest. The bill intends to increase transparency for student loan borrowers.
Expected Effects
The primary effect of the STUDENT Act would be to provide student loan borrowers with a clearer understanding of the total cost of their loans, including interest, before they commit to the loan. This could lead to more informed borrowing decisions. It may also encourage borrowers to explore alternative repayment options or seek ways to reduce their overall debt burden.
Potential Benefits
- Increased Transparency: Borrowers will have a clearer understanding of the total cost of their loans.
- Informed Decision-Making: Students can make better choices about borrowing.
- Potential for Reduced Debt: Borrowers may seek ways to minimize interest payments.
- Empowerment: Provides borrowers with more control over their financial future.
Most Benefited Areas:
Potential Disadvantages
- Limited Scope: Only affects federal student loans and may not cover private loans.
- Complexity: The standard repayment plan may not be suitable for all borrowers, potentially leading to inaccurate interest estimates.
- Administrative Burden: Lenders may face increased costs to implement the new disclosure requirements.
- No Direct Financial Relief: The act only provides information and does not reduce loan amounts or interest rates.
Constitutional Alignment
The STUDENT Act appears to align with the general welfare clause of the US Constitution, as it aims to improve the financial well-being of citizens by providing greater transparency in student loan borrowing. Specifically, it falls under Congress's power to regulate commerce and provide for the general welfare through legislation related to education and financial aid. Article 1, Section 8 grants Congress the power to make laws that are necessary and proper for carrying out its enumerated powers.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).