Senator promotes financial aid office to add disclosure statements

By Megan Jones

For several student borrowers wishing to attend college, taking out student loans may be the biggest financial transaction they have encountered at 18 years old. Tony Fiorentino, Illinois Student Senator and graduate student, fears that these students might not have the financial literacy to know what they are getting themselves into.

“We really hope that the administration wants to work with students because we understand that there are limitations with how cheap tuition can get, and there is one thing that we have total control over, which is telling students the truth about student loans,” Fiorentino said. “The more transparent we can be, the better informed students are.”

He hopes to urge the University’s Office of Student Financial Aid to send, by mail, a printed financial disclosure statement to all students applying for loans through the University for each separate loan they take. The student would then need to sign the disclosure statement and initial all important terms and conditions that apply to their loan before returning it to the office. 

“At this point, we don’t do that,” said Dan Mann, director of financial aid. “We are not required to do that, and I’m not sure about the legality of doing that. It would obviously change the financial aid delivery process and add additional steps that are not needed at this point.” 

Originally, the resolution said a student would not receive a loan until he or she signed the disclosure statement; however, the Illinois Student Senate’s Student Debt Awareness Committee, which is backing the resolution, realized the legality issues regarding keeping federal money from students until the statement is signed. 

Mitch Dickey, ISS member and sophomore in LAS, said the Committee on Community and Governmental Affairs, which the resolution was referred to at the Illinois Student Senate’s Jan. 29 meeting, changed the provision to place a student hold on student accounts if they do not sign the disclosure statement. The hold would not allow students to register for classes, similar to action taken if a student had an overdue library book. 

“What this resolution does is it merely requires us to tell students the truth. No more, no less,” Fiorentino said. “I can’t imagine anyone would be opposed to telling students the truth about student loans.” 

Fiorentino said many students do not realize conditions buried in the back pages of the master promissory note, such as that their Social Security benefits can be garnished to repay a federal student loan or that their tax refunds can be seized by the Internal Revenue Service to pay back their student loans if they default. 

“No one really puts a piece of paper in front of them and asks them to sign their signature. There’s not a lot of formality to it like other major transactions,” Fiorentino said. “Instead, they type their full name into a blank text box, and I don’t think students realize the long-term financial implications because it doesn’t look like most contracts, and there is not a high level of formality.” 

The master promissory note, a legal contract signed electronically, is provided when a student takes out his or her first loan and applies to all other loans within a 10-year period.

“So, if they didn’t read the full contract at that time, anytime they take out a loan in the next ten years, they’ll never get that statement again,” Fiorentino said. “If they didn’t save it on their computer or read it, they’ll never get another warning.” 

However, Mann said all students are required to complete entrance loan counseling after accepting a loan, which helps students gain more knowledge in regards to the process. Even if they are 18 years old, “the loan is in that student’s name and they are responsible for repaying that loan, so it is important that they are provided the information and understand what they are receiving,” he said. 

At the student senate’s Jan. 29 meeting and during committee meetings, senators have raised questions regarding the cost of implementation at the University. Fiorentino said it would cost one piece of paper, one stamp and some administrative cost, but he “can’t imagine that the cost is more than a few dollars per student, which is worth it when you are considering they are taking on tens of thousands of dollars of debt.” 

“If we say that each new student has to sign this, it would probably be around 10,000 students, so yes that would add another task and would probably take some programming to the system,” Dickey said. “However, the current opinion is that it’s more than likely worth it.” 

Jonathan Lackland, deputy director for advancement, external and governmental relations at the Illinois Board of Higher Education, said it is difficult for him to say whether the resolution would be worth it financially. 

“I just think that the more information you can give the students, the better,” he said. “It’s critical, and it puts everyone on the same page potentially.” 

Mann believes all processes are electronic these days, and the information is being distributed to the students whether they read it online or it is presented via mail. 

“I think we (not just the University, but the entire student financial aid process) have developed and are trying to provide a streamlined electronic and efficient way for students and families to have their financial aid processed,” Mann said. “Most students and families appreciate the ease with how that process works and how we are able to get money to them quicker through these electronic processes.” 

Fiorentino warns that if a student borrows $20,000, it could easily grow to $100,000 if payments including servicing fees, collection costs and compounding interest rates are not maintained. 

“It’s very common for people to owe three to four times what they originally borrowed,” Fiorentino said. “Many students just don’t know these sorts of things, so we want to make sure that universities and colleges are properly educating students and warning them frankly about these kinds of risks that are associated with significant amounts of debt.” 

After Fiorentino gains the backing of the student senate, he hopes to sit down and work hand-in-hand with the administration. He also submitted the resolution to the Illinois Board of Higher Education Student Advisory Committee, which comprises a group of students from universities and colleges across the state. 

He urged committee members to take the resolution to their own respective student governments and propose the same policy at their own schools. 

“Right now, it’s really just a first draft, but it will be improved by democratic processes at different campuses so large bodies of students can arrive at the kind of disclosure statement that we all agreed would work best for the interest of our students,” Fiorentino said. 

Dickey submitted a resolution to add a referendum question, which asks the students whether they think the University should provide the disclosure statement as part of the loan package. If approved, the question will appear among the Spring 2014 referenda. 

Megan can be reached at [email protected] or @meganash_jones.