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WASHINGTON (Reuters) - The Obama administration unveiled a form on Tuesday to help students compare college financial aid offers and better understand how much debt they will incur by the time they graduate.
If embraced by colleges and universities, the new form would provide key information like the school's graduation rate and tell students with loans what their monthly payment could look like upon graduation.
The form will include the average loan default rate and clearly differentiate between grants and scholarships, according to the Consumer Financial Protection Board and the U.S. Department of Education.
The form would be voluntary with officials urging schools to adopt the form for the 2013-2014 school year.
"We must unravel the mystery of higher education so that students can invest wisely and make the best, most informed decision possible about where to enroll," Secretary of Education Arne Duncan told reporters on Monday.
The Obama administration has been eager to be seen helping students in an election year, months after the total U.S. student loan debt reached an estimated $1 trillion in April.
That same month, President Barack Obama signed an executive order requiring colleges that accept government funding for veterans' education to provide military students with the new financial aid form.
The president also recently signed into law a bill to keep federal student loan interest rates from doubling to 6.8 percent on July 1, a rare spot of election-year bipartisanship.
Roughly 10 universities have said they support the idea behind the form, Duncan said on Monday.
He said he plans to publish an open letter to colleges on Tuesday asking them to adopt the "shopping sheet" as part of their financial aid awards starting in the 2013-2014 school year.
But legislation would be required to force schools to comply, the agencies said.
"We urge all universities and higher learning institutions to embrace transparency by adopting the financial aid shopping sheet and fully expect that they will do so," the Consumer Financial Protection Board (CFPB) Director Richard Cordray said.
A bipartisan Senate bill, proposed in May and backed by Democrat Chuck Schumer and Republican Chuck Grassley, would require universities to issue a universal financial aid letter.
The consumer watchdog agency was created by the 2010 Dodd Frank financial reform law to police consumer products such as mortgages, credit cards, and student loans.
It opened its doors about a year ago.
The CFPB and Education Department also released a report last week on student loan debt. It found borrowers who took out private student loans in the run-up to the financial crisis are facing higher levels of default, reflecting the risky lending practices at the time.
The Department of Education and the Consumer Financial Protection Bureau said private lenders have since cleaned up some of the worst activities, but lawmakers should still work to improve the private loan market and enhance protections for students.
Reporting by Alexandra Alper; Editing by Lisa Shumaker