Two U.S. Democratic Senators introduced a bill that would require colleges to counsel students before they sign on to private loans and inform them if they are eligible for federal loans.
The “Know Before You Owe Act of 2012” would also require the borrower’s school to confirm the student’s enrollment status, cost of attendance and estimated federal financial aid assistance before the private student loan is approved, according to a statement today released by Senator Richard Durbin, a Democrat from Illinois.
Private loans don’t have the same kinds of protection as federal loans, which include income-based repayment and deferment options. U.S. educational debt has reached $1 trillion, according to the Consumer Financial Protection Bureau.
“With student loan debt at a record level, we must empower students to make informed decisions about how they finance their education, especially when it comes to the risks of private loans, which can sink students into financial quicksand and are not dischargeable in bankruptcy,” the other sponsor, Tom Harkin, a Democrat from Iowa, said in a statement.
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