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New bill takes aim at student borrowers' financial cluelessness
A group of Democratic senators are trying to pass a bill that's supposed to help curb the number of impressionable teens and college students who sign up for bigger student loans than they can afford.
Dubbed the "Smarter Borrowing Act," the bill, sponsored by Senators Tom Harkin of Iowa and Barbara Mikulski of Maryland, aims to standardize and improve the mandatory counseling that colleges are supposed to give when students take out federal loans.
"In Iowa and around the country, I hear from college students and parents with unmanageable debt who wished that they had better information about their options before taking out student loans," said Sen. Harkin in a press release. "Our bill will help students navigate the student loan process, from beginning to end, so there are no surprises after graduation."
I wish something like that existed when I was a clueless teen. For me, all it took was the promise of academic utopia -- and virtually zero financial guidance -- to become convinced, at 17, that the right kind of college was worth a decade or more of steep student loan payments.
I still remember, for example, the day I received a slim brochure in the mail from a small liberal arts college in New York. Toward the front of the pamphlet was a photo of a young woman reading a book underneath a tree and an irresistible tag line that was expertly designed to appeal to artsy teenagers everywhere: "You are different. So are we."
Inside the brochure, beautifully written passages touted Sarah Lawrence's low student-faculty ratio and writing-intensive curriculum. Glossy photos showed students gathered around tables, deep in thought or hanging out under an arbor of lavender wisteria. There were even soul-stirring quotes from literary and intellectual luminaries punctuating the pages, including an oft-quoted line from the mythologist and former Sarah Lawrence professor Joseph Campbell inspiring readers to "follow your bliss."
For a certain kind of high school student, it was an incredibly effective piece of marketing. What the brochure failed to mention, however (or perhaps I just completely missed it), was the college's extraordinary price tag, which even then was more than many people make in a year.
No matter, I thought at the time. I was hooked. I was going to that college, no matter how much debt I'd have to take on to make it happen. My parents weren't convinced. Everyone in my family, including all of my siblings, went to state schools. For them, there was no other choice.
Undeterred, I applied for financial aid myself and attempted to make sense of the bewildering options for student loans. As I remember, the forms and brochures were incredibly confusing. I even got scammed using some savings I had inherited from my great-grandmother to pay for an online financial aid service that promised to help me. (It did nothing.)
When my financial aid package turned out to be far smaller than I expected, I steeled myself for the debt I'd have to take on. I was fully prepared to get thousands of dollars' worth of student loans over the next four years in order to finance my academic fantasy.
As a teenager, student loan debt was not something I cared or thought much about -- mostly because it didn't seem real. At that time, the Great Recession was still half a decade away, and I figured that as long as I worked harder than the next person, I was financially set.
Unfortunately, that's the problem with making major life decisions as a teen. Your understanding of the world is still half-baked and unless you've been blessed with ultra-involved parents who are willing to do the research for you, you're at risk of making financial mistakes that could you haunt you for a lifetime.
In the end, I was lucky. I still got to go to my dream college, but didn't graduate with the enormous loans that I might have, thanks to family members who stepped in at the last minute and saved me from financial ruin before I could even legally drink.
Most people, however, aren't so lucky.
If the financial counseling system Senators Harkin and Mikulski are trying to implement really is as stellar as they say -- which is debatable according to people familiar with the current counseling system -- then I applaud it. I know of lots of indebted peers who wish they'd had more help navigating the financial aid system.
But colleges need to step up, too. Mailing promising high school juniors seductive brochures is fine. I certainly don't regret attending Sarah Lawrence since the family members that helped me pay for it could afford to without going into debt.
However, too many colleges include in their marketing materials vague references to the proportion of students that receive some kind of financial aid or to the handful of merit scholarships that are available. But they don't disclose how much of that financial aid consists of high-cost student loans.
Instead, many colleges make it sound like figuring out the nitty gritty details of financial aid -- such as how much those loans will cost you over the course of your lifetime -- is the easy part of applying for college. (It's getting in that really matters!)
And for all the ambitious teens that don't know any better, that's really too bad.
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