Should Student Loan Borrowers Undergo Annual Financial Counseling? (H.R. 1635)

What is H.R. 1635?

(Updated March 4, 2019)

This bill would require an institution of higher education (IHE) that participates in federal student aid programs to require student borrowers to undergo financial counseling each year, rather than just entrance and exit counseling. Federal Pell Grant recipients and parent PLUS Loan borrowers would also be required to undergo annual counseling. Counseling would include comprehensive information on: terms, conditions, and responsibilities regarding a grant or loan; information on a typical student budget; the right to request an annual credit report; average income and employment data; and financial management resources.

Exit counseling information requirements would be revised and expanded to include: an outstanding loan balance summary; the anticipated monthly payments under standard and income-based repayment plans; an explanation of the grace period preceding repayment; the option to pay accrued interest before it capitalizes; the right to request an annual credit report; and loan servicer contact information.

The Dept. of Education would be required to maintain a consumer-tested online counseling tool that provides annual and exit counseling. The Institute of Education Sciences would be required to study the impact and effectiveness of exit counseling, annual counseling, and the online counseling tool.

Argument in favor

Student loan debt presents a crushing burden for many individuals and families across the country, and part of the solution is giving borrowers more information on their financial responsibilities. By undergoing required annual counseling, student loan borrowers will make better financial decisions rather than only thinking about their obligations when they enter and exit their programs.

Argument opposed

Existing entrance and exit counseling for student loan borrowers is good enough, they can do additional research on things like income and employment data on their own without mandatory annual counseling. There’s no need for families with Parent PLUS loans or students receiving Pell Grants to get annual counseling.

Impact

Student loan borrowers, recipients of Pell Grants, and borrowers of Parent PLUS loans; and the Dept. of Education.

Cost of H.R. 1635

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Rep. Brett Guthrie (R-KY) introduced this bill to improve financial literacy among student loan borrowers  by requiring student borrowers to undergo financial counseling each year:

“Our country is facing a student debt crisis. Part of fixing the problem is ensuring that student borrowers grasp the extent of their financial obligations. By requiring students to complete annual financial counseling when they accept federal student aid, we can help them better understand which financial options to draw from first and the implications of their future debt load and repayment scenarios. I am pleased to work with Congresswoman Bonamici to reintroduce this bill to help students achieve the American dream of attending college.”

Original cosponsor Rep. Suzanne Bonamici (D-OR) added:

“College should be accessible and affordable for anyone who wants a higher education. But the growing cost of college has created challenges and too much student loan debt for too many students and families. Improved and more frequent financial counseling will help student loan borrowers anticipate the complete costs of college and make informed decisions that can reduce borrowing.”

This legislation has the support of 21 bipartisan cosponsors, including 16 Republicans and five Democrats.

Media:

• Sponsoring Rep. Brett Guthrie (R-KY) Press Release (Previous Version)
  
• Cosponsoring Rep. Suzanne Bonamici (D-OR) Press Release
  
• ThinkAdvisor
  
• Washington Examiner