The CFPB has launched its latest “Know Before You Owe” online tool–the “Paying for College-Cost Comparison Tool.” The CFPB intends the beta version it has posted to be a “thought starter” and asks for feedback.
The tool allows a student to identify up to 3 colleges at a time in which he or she is interested and provides cost information for each of those colleges that compares the cost of attending each college identified by the student with the cost of an average public university (for an in-state student) and the cost of an average private university (without distinguishing between an in-state and out-of-state student). Based on information obtained from the Department of Education, the student is shown a “sticker price” for first-year costs and the “total borrowing” required assuming the student were to receive financial aid equal to the college’s “average grants & scholarships” and borrow the balance.
The student is also shown an estimated monthly payment amount for a 10-year repayment term based on the assumption that the student completes a bachelor’s degree in four years or an associates degree in two years, the “sticker price” remains constant for the duration of the program, and the student takes out the same types and amounts of loans each year (which are assumed to be a mix of Stafford unsubsidized and private loans.)
The debt burden this would entail is identified as either low (less than 8% of average monthly salary) , medium (8-14% of average monthly salary) or high (greater than 14% of average monthly salary). These calculations use the average national salary, one year after graduation, for a student with a bachelors degree, a determined by the Department of Education, and assume that the student will make all the payments.
For the colleges he or she has identified, the student can access a worksheet on which the student can input his or her individualized financial aid information to obtain individualized monthly payment information. Military benefits can also be taken into consideration. The worksheet includes, if available, a graduation rate (only for bachelors degrees), retention rate, and federal student loan default rate. The tool provides links to detailed explanatory materials intended to help the student understand the information provided, including the other assumptions on which such information is based.
While we are a bit concerned about the mixing of specific information and generic information for decisionmaking, we are supportive of efforts to assist students and their families better understand the debt burden that can result from financing a college education. (We did run into some glitches in testing the tool, with schools sometimes being dropped from the test results and with one test showing a community college with average grants and scholarships well in excess of the sticker price, but we fully expect the CFPB to correct these glitches as it refines the beta version.)