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New CFPB tool, Your Financial Path to Graduation, explained

This new tool can help you tell if that degree is really affordable

The Consumer Financial Protection Bureau (CFPB) unveiled a new online tool on Wednesday that students and parents can use to understand the cost of a college — and decide whether a program is worth it.

The tool, called Your Financial Path to Graduation, allows students to compare financial aid packages and understand how much their student loan repayments might fit into their budgets after graduation. It’s currently available on the CFPB website.

“The tool we released today is an innovative tool to provide students and their families with simplified and effective disclosures on the cost of college and the cost of their financing options over the life of the loan,” CFPB Director Kathleen Kraninger said in a statement. “This tool we’ve developed seeks to do that and goes to the core of our mission to protect consumers and prevent consumer harm.”

The CFPB created this tool after finding that less than half of students calculated monthly repayments before taking out a student loan, CFPB Policy Analyst Kate Mullen said during a webinar for financial educators. The design was heavily influenced by feedback that the CFPB had received from students and parents on pain points in the financial aid process.

When to use Your Financial Path to Graduation

Your Financial Path to Graduation is designed for students who have already received financial aid offers from multiple schools. You can use it any point during your college career. But it best serves students who are about to enter a degree program as a full-time student.

You can use it on your own or with the help of your college advisor or guidance counselor. Many high schools across the country have partnered with the CFPB as part of a pilot program to use this tool for all college-bound seniors. If your school is part of the program — or joins next year — they can walk you through the form and answer any questions you have along the way.

While undergraduates might use it the most, graduate and professional students can also benefit. In fact, they could benefit even more. Graduate degrees come with the promise of higher salaries. But more graduate students take out private student loans than undergraduates. These are often more expensive and less flexible than federal student loans and could lower the return on investment in a degree program.

What you need to get started

Your Financial Path to Graduation requires a lot of information about your financing, school and financial aid package. Have the following information on hand before you get started.

  • Copies of your financial aid offers
  • How much you and your family plan on spending on school
  • Local government loan offers, including rates and fees
  • Private loan offers
  • Grant or scholarship offers not included in your financial aid offer
  • Employer tuition assistance
  • Estimated income from any job outside of work-study

It also recommends that you have the financial aid office contact information for each school you’re considering. That way you can reach out if you have any questions about your offer.

How it works

You can get started by filling out a questionnaire on the CFPB website. If you’re choosing between multiple financial aid offers, you need to fill out the questionnaire for each offer. The questionnaire covers the following topics:

  • Your school and living situation. This includes questions about what type of degree program you’ll attend and where you plan on living during the academic year.
  • Costs. This is where you’ll provide information about your school’s cost of attendance. If you don’t have that information on hand, the CFPB will pull cost of attendance information from the Department of Education’s College Scorecard.
  • Grants and scholarships. Use your financial aid offer to enter any grant or scholarship money you’re receiving toward next year’s tuition.
  • Work-study. If you’ve applied for a federal work-study program, enter the estimated amount your school expects you to earn through this program.
  • Federal loans. Here you’ll enter the amount you’ve been offered in federal Direct Subsidized and Direct Unsubsidized loans.
  • Other loans. This is where you can enter any state or nonprofit, as well as private, loans that you have already applied for or intend to apply for. Include the interest rate and fees.
  • Other sources of financing. This includes personal or family contributions to your education, college savings plans, income that isn’t included in work-study, employer tuition assistance or any other funds that will go toward your education.

Understanding the cost of your degree

After filling out the questionnaire, the tool will use the data you provided to let you know if there are any gaps you still need to cover. If the money you entered doesn’t cover the cost of attendance at your school, you’ll be invited to review your answers and find a place to cover the gap.

Then the tool uses the student loan information you provide to project how much debt you might graduate with. And it compares it to the median salary of graduates from your program. It also breaks down how much interest you might pay on a 10-year repayment plan for the total cost of your loans.

At this point, you have the option to see how many hours you’ll likely need to work to afford your monthly repayment. This is based on that median salary you saw earlier. You’ll also have the option to see how your monthly repayments fit into the typical budget of someone living in your state.

Finally, the tool gives you a rundown of how that degree program compares with other schools in terms of graduation, default and loan repayment rates. You’ll see a summary of your financial plans and the projected outcomes of those plans. And you’ll have the option to get advice on how to put your plan into action — or compare other options.

Follow the directions to email the link to yourself for your records. And restart the process if you want to learn how other schools stack up.

Consider these shortcomings before making a decision

Your Financial Path to Graduation isn’t perfect. There are several points where it can be misleading, which are worth considering when going over the results.

For instance, it relies on the median salary of graduates from your program, rather than starting salary. Your income will likely be lower during the first few years — though it can vary depending on your major.

It also doesn’t account for different repayment plans — a 10-year repayment plan is the shortest the federal government offers and comes with the highest monthly repayments. If your projected salary is too low to afford student loan repayments according to the calculator, you can lower that cost by signing up for a longer loan term or income-driven repayments. But you can expect the total cost to be higher.

And if you’ve signed up for work-study, there is a chance you won’t get the maximum you’re eligible to earn. Students aren’t guaranteed placement in work-study jobs. During the coronavirus pandemic, it’s possible that you won’t be able to find a job or get all of the hours that your offer allows.

The CFPB is aware of these shortcomings and will likely release an updated version in the following years. But as it stands, Your Financial Path to Graduation is one of the simplest ways to make an apples-to-apples comparison of financial aid offers from different universities.

Photo: Getty Images

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