Aiming to create a culture in which college students are more financially literate when they borrow funds for their education, U.S. Sens. Tim Scott (R-SC) and Joe Donnelly (D-IN) introduced the Empowering Student Borrowers Act last week.
The legislation would provide students with access to the most current tools and information to make sound financial decisions about their student loans.
“Financial literacy is incredibly important for families across America, and especially for those families and students who will be taking out student loans in order to further their education,” Scott said.. “By developing best practices to empower students and their families when making decisions regarding their finances, we can help reduce loan debt and ensure more folks have the opportunity to reach their educational goals."
A recent study by The Brookings Institution revealed that nearly 50 percent of college freshmen in the United States largely underestimated the actual amount of student debt they were accruing, and knew little about repayment options or resources for assistance or education.
The bipartisan legislation would mandate the U.S. Department of Education to develop, review and maintain a set of best practices for colleges and universities to teach skills of financial literacy and distribute relevant information that would help students when making decisions related to student borrowing. These best practices would include providing a clear understanding of students' total borrowing obligations, including monthly payments and repayment options; effective methods to educate students in financial literacy; and reiterating the importance of completing college and working toward a successful career in order to repay their loan.
“Financial literacy is a critical component to success beyond graduation, and we appreciate Senator Scott’s leadership on this issue in Congress,” Harris Pastides, president of the University of South Carolina, said. “USC is committed to providing meaningful financial literacy programs for its students and has been at the forefront of financial literacy program design. The results of these efforts are readily apparent in the success of our graduates. The University of South Carolina’s student loan default rate is well below the national average.”
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