Calderon Legislation Increasing Student Loan Debt Transparency Passes Assembly Floor
SACRAMENTO, CA – Today, the Assembly approved AB 1178 today, a measure authored by Majority Leader Ian Calderon requiring post-secondary institutions to annually inform students of their cumulative debt and estimated monthly payments.
“College students are not actively informed about their cumulative student loan debt while they are making borrowing decisions,” state Majority Leader Ian Calderon. “AB 1178 takes proactive steps to alleviate the student loan crisis by requiring by ensuring that students receive up-to-date, accurate information about their mounting student debt so they can plan for their post-graduation finances.”
At no time during a student’s post-secondary education are universities required to inform students of their cumulative student loan debt or any benchmark of monthly payments. A study by Citizens Bank found that 60% of recent college graduates surveyed underestimated their own monthly loan repayment amount. Student borrowers may decide to accept more loans than necessary without understanding the full consequences of repayment upon graduation.
After the Indiana University system instituted a similar student debt letter, the total federal, university and private loans taken out by students decreased by $98.7 million, or 15%, between the 2011 and 2016. Upon witnessing the dramatic reduction in student borrowing, the state legislature passed legislation to send similar letters to all students attending post-secondary education in Indiana. Similar legislation has been passed in Wisconsin and Nebraska and is currently being considered by other states and the federal government.
AB 1178 requires all California higher education institutions, except California Community Colleges, to provide annual individualized letters to students including:
- A students total cumulative loan amount
- Potential total payoff amount
- An estimated monthly payment based on a formula created by each institution
This information will begin being disseminated in the 2018-19 award year and between June 1 and August 1 each year when students make financial aid decisions for the following year. Recent amendments, at the request of the public segments, permit institutions to give instructions on how to access the National Student Loan Database, if they cannot provide estimates pursuant to the bill.
AB 1178 is supported by the Institute for College Access and Success, uAspire, and the American Student Assistance.
Contact: Lerna Shirinian (562) 692-5858