U.S. Education Secretary Arne Duncan is urging colleges and universities to adopt an easy-to-understand financial aid form to help students make smarter decisions on where to study, how to pay and determine what they'll owe.
The Department of Education and the Consumer Financial Protection Bureau are unveiling a "shopping sheet" Tuesday that would provide each incoming student with information on the costs of tuition, housing and other fees.
The one-page document also is designed to help students figure out how much they would receive in grants and scholarships and what options are available for loans. Additionally, it would also provide details on the percentage of students who graduate, how much the average student pays monthly on federal loans after graduation and the default rate.
Colleges and universities will not be required to use the form. Duncan said he will be sending an open letter encouraging all institutions to adopt it. In June, the Education Department announced that 10 universities had agreed to provide information similar to what is in the new form.
The Education Department and the Consumer Financial Protection Bureau released findings from a report on Friday concluding that risky lending caused private student loan debt to balloon over the last decade, leaving many Americans struggling to pay off loans they cannot afford.
The study focused on private student loans, which spiked from $5 billion in 2001 to more than $20 billion in 2008. The market shrank to $6 billion in 2011 after the financial crisis and a tightening of lending standards. Student loan debt has surpassed credit cards as the largest source of unsecured debt for U.S. consumers; Americans now owe more than $1 trillion in student loans.
Duncan said many colleges and universities use student aid letters that are confusing to understand and don't make clear exactly how much is being offered in aid and scholarships, making it difficult for families to comparison shop.
He called the shopping sheet a "step in the right direction."
"All of us share a responsibility for making college affordable," he said. "And for keeping the middle class dream alive."