S.1559 - Know Before You Owe Federal Student Loan Act of 2025 (119th Congress)
Summary
S.1559, the Know Before You Owe Federal Student Loan Act of 2025, aims to revise counseling requirements for student loan borrowers. It mandates more comprehensive pre-loan counseling, including estimated monthly payments compared to income and a warning about high debt-to-income ratios. The bill also requires students to confirm the exact loan amount they wish to borrow and mandates quarterly disclosures during periods when loan payments are not required.
Expected Effects
The bill is likely to lead to more informed borrowing decisions by students. It could also reduce the overall amount of student loan debt. The increased transparency and counseling may help students better understand the financial implications of their loans.
Potential Benefits
- More informed borrowing decisions due to enhanced pre-loan counseling.
- Potential reduction in student loan debt as students are prompted to borrow only what they need.
- Increased awareness of debt-to-income ratios and repayment challenges.
- Better understanding of loan terms and repayment options through periodic disclosures.
- Encouragement to explore alternative funding sources like scholarships and work opportunities.
Potential Disadvantages
- Increased administrative burden on educational institutions to provide more detailed counseling.
- Potential for students to be discouraged from pursuing higher education due to increased awareness of debt.
- The effectiveness of the counseling depends on the accuracy of the data used for income and expense estimations.
- Quarterly disclosures may cause anxiety or stress for borrowers during periods of non-payment.
- The bill does not address the root causes of high tuition costs.
Constitutional Alignment
While the Constitution does not explicitly address student loans, Congress's power to legislate on matters related to education and general welfare is broadly implied. The bill aligns with the general welfare clause of the Preamble, as it seeks to improve the financial well-being of students and reduce the burden of student loan debt. The bill does not infringe upon any specific constitutional rights or limitations.
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).