The Empowering Students Through Enhanced Financial Counseling Act

A proposal by Senators Mark R. Warner, Cory Gardner, Tim Kaine, and Tim Scott
to deliver students the tools and information they need to borrow and repay their student loans in a
responsible manner.

Background:

Nationwide, Americans owe more than $1.5 trillion in student loans, outstripping credit cards and
auto loans as the country’s leading source of non-housing debt. It has never been more critical for
individuals to make well-informed choices regarding how to pay for their postsecondary education.
Unfortunately, many students do not have the information they need to make sound financial choices
about their college careers. This should not be surprising considering the confusing maze of loan and
grant programs students must navigate at the state and federal levels, compounded with assistance
offered by individual institutions and within the private sector.

Additionally, many students never receive meaningful financial literacy assistance as they review
their options to pay for college. A survey of current students and recent graduates with a high level of
student loan debt found that more than 40 percent could not recall having received financial
counseling, even though counseling is already required before students can receive their first federal
loan. Further, no counseling is provided to students who receive only a Pell Grant or to parents who
take out federal loans to help pay for their children’s education. Current policies are failing to prepare
individuals to make wise financial decisions. As a result, many students graduate unable to manage
the loans they used to finance their education, leading to significant hardship for borrowers and
greater risk for taxpayers.

What the Proposal Does:

To help students make smart decisions about financing their higher education, Senator Warner will
reintroduce the Empowering Students Through Enhanced Financial Counseling Act. He first
introduced the bill in 2016. The bill has been championed in the past three Congresses by
Representatives Brett Guthrie (R-KY) and Suzanne Bonamici (D-OR). The bipartisan legislation will
promote financial literacy through enhanced counseling for all recipients of federal financial aid, and
specifically:

 Ensure borrowers—both students and parents—who participate in the federal loan program
receive interactive counseling each year that reflects their individual borrowing situation.
 Provide awareness about the financial obligations students and parents are accumulating by
requiring borrowers to consent each year before receiving federal student loans.
 Inform low-income students about the terms and conditions of the Pell Grant program through
annual counseling that will be provided to all grant recipients.
 Direct the Secretary of Education to maintain and disseminate a consumer-tested, online
counseling tool that institutions can use to provide annual loan counseling, exit counseling,
and annual Pell Grant counseling.

If you have any questions, please contact Lauren Marshall in Senator Warner’s office at
Lauren_Marshall@warner.senate.gov or (202) 224-2023.
What are the current counseling requirements for students taking out federal student loans and Pell
Grants? How is this an improvement?
Current law requires that institutions provide one-time entrance and exit counseling to student loan borrowers
receiving federal student aid, excluding Parent PLUS loans and consolidation loans. There is currently no
statutory requirement to counsel students who only take out a Pell Grant.
This bill is an improvement on the current standard because it requires annual counseling for borrowers,
including Parent PLUS borrowers, but still excluding consolidation loans. The annual requirement ensures that
borrowers have an accurate sense of the size and terms of the debt they are accumulating. Further, the bill
requires that Pell Grant recipients receive information on the terms of the grant, approved educational expenses,
and an explanation of why the student may have to repay the grant.
The bill also outlines practical financial information that borrowers must receive, including information on how
their program of study and intended occupation may affect their monthly payment amount; some of the
drawbacks of private education loans; and that the borrower is not required to accept the full amount of the loan
offered. These elements of the bill combine to give students more relevant and timely information than they
currently have access to.
Who will provide the new loan counseling? How burdensome will it be? How effective will it be?
Institutions will still be responsible for providing student loan counseling to their students. The Department of
Education already makes print and video resources available online that schools can access free of charge.
Adapting these existing materials to reflect the new annual counseling requirement will not prove overly
burdensome or expensive for either schools or the Department.
There is evidence to suggest that giving student borrowers access to information similar to that included in this
bill on an annual basis can lead to decreases in average debt. However, the bill also instructs the Director of the
Institute of Education Sciences to conduct a longitudinal study of the impact and effectiveness of the prescribed
student loan counseling, including cumulative borrowing levels, program completion, and successful entry into
repayment. This provision ensures that policymakers and stakeholders have sound data on how effective the
counseling is in the long-term.
How does this bill complement income-based repayment (IBR) plans?
This bill complements IBR plans by requiring schools to provide information in entrance and exit counseling on
how such plans might impact a borrower’s anticipated monthly payment amount.
What are the current counseling requirements for parents taking out Parent PLUS loans?
Under current law, parents borrowing a Direct PLUS Loan to pay for their child’s education are not required to
complete entrance counseling.
What is the bill’s legislative history in past Congresses?
In the 113th Congress, the bill (H.R. 4984) passed the House on July 24, 2014, by a vote of 405-11.The Senate
did not take action on the House-passed bill, nor was a companion bill introduced.
In the 114th Congress, the bill (H.R. 3179) passed the House by voice vote on July 11, 2016. On June 29, 2016,
the Senate companion (S. 3116) was introduced by Senators Warner, Heller, Kaine, and Gardner. The Senate
did not take action on the House-passed bill.
In the 115th Congress, the bill (H.R. 1635) passed the House on September 5, 2018, by a vote of 406-4. On
November 6, 2017, the Senate companion (S. 2081) was introduced by Senators Warner, Heller, Kaine, and
Gardner. The Senate did not take action on the House-passed bill.