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Acceptance letters to detail costs

| Wednesday, Oct. 3, 2012, 9:24 p.m.

WASHINGTON — When excited students tear into college acceptance packets next spring, many will find something new inside: information that tries to make it easier to understand the costs.

The federal government and more than 300 colleges and universities want to make sure students “know before they owe” what could be bills for thousands of dollars awaiting them down the road.

That's what Richard Cordray, the director of the Consumer Financial Protection Bureau, said this summer when his office introduced its college costs “shopping sheet.” “Students need to know how much their loans are ultimately going to cost, when all the interest and fees and other costs are factored into the equation,” he said.

The push by Cordray's agency and the Department of Education for clearer college-cost information comes as tuition and student debt have been rising and household income has been falling. With 7,000 schools across the country using different forms to show costs, scholarships and loans, it can be hard to compare.

It's also all too easy for many high school students to glide over what loan repayments could mean later. The default rate might be evidence of that. In the past three years, it's climbed to 13.4 percent.

Student loans are in default when a borrower with a monthly payment is delinquent for 270 days. The consequences are serious, and can include garnished wages, collection agency costs and many years of a bad credit rating.

“Too often, students are left without a clear explanation of what the costs mean or how they compare to other colleges they are considering, and as a result, many students leave college with debt that they didn't fully understand at the time they entered school,” Education Secretary Arne Duncan said last week in a blog post.

Duncan wrote to all the nation's college and university presidents in July, asking them to use the college shopping sheet. Two months later, 316 schools representing 10 percent of the nation's undergraduates agreed to do so.

They include the University of North Carolina-Chapel Hill, the University of Texas system and the University of Phoenix online schools.

Lynda George, the director of student financial aid at the University of Kentucky, said clearer information would be better for students and families, and better public relations for the university.

“We hope that the more they are aware of what they're borrowing, they'll think about how to pay it back later,” she said. “But I don't know that telling them upfront is going to impact whether or not they default in the end.” The form's “know before you owe” benefits are limited. It doesn't give a customized estimate. Instead, it shows median borrowing — how much a typical student at the school borrows for an undergraduate education and the approximate monthly payments over 10 years.

Students generally don't pay back loans while they're in school, but start six months after graduating or after they cut back credits to less than half time. The size of repayments depends on the amount the student has borrowed and interest rates.

The form has a link to a government website about repayment plans, where students can find a calculator to get an estimate of monthly payments. The form also shows tuition and all other college costs, and any scholarships a student receives. The remaining net cost is what a student must pay with savings, work or loans.

The percentage of students at that particular school who graduate in six years and the percentage of loan borrowers there who default will be included.

Schools can choose to use the shopping sheet or not, except in the cases of veterans and members of the armed services who are seeking admission. President Obama signed an executive order last spring that included provisions requiring schools to make the form available to them.

Lauren Asher, the president of The Institute for College Access and Success, a nonprofit group that advocates for more affordable college education, said the shopping sheet was an important step toward clearer information about the net price of college.

“It's a way to allow for an apples-to-apples comparison for financial aid offers, which can be difficult because schools are not currently required to provide all this information,” she said.

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