Tagged in higher education


3 Tips for More Effective Student Loan Exit Counseling

May 23, 2018

student-loan-exit-counseling

With the end of the academic year here, seniors across the country are juggling finals, graduation plans, and looking toward the next chapter of their lives. In the middle of this busy time, students have another major responsibility to tackle: student loan exit counseling. The Department of Education mandates exit counseling for all federal borrowers, but all too often the guidance students receive is tedious and difficult to understand. Here are some easy ways you can improve the loan information your students receive at the end of their education.

  1. Personalize borrower learning

When a financial aid counselor just does an “info dump” of details, the chances of the student understanding their obligations drop. Because loans can be such a significant part of a student’s life, it’s essential that the information a student receives is specific and applicable to their own situation. For example, the information a Perkins borrower needs to know is different from that needed by a student who has private loans. Ensuring your students have exactly the information they need makes it easier for them to develop a realistic plan for repayment.

  1. Simplify the jargon

So many of the materials students receive during their exit counseling are rife with jargon and complex financial terms. While learning to understand these terms is a key part of becoming a financially responsible borrower, don’t miss the opportunity to enhance the student’s education a little bit more. Strive to provide information that’s written in a friendly, clear tone with easily accessible language. Define the complicated terms, so borrowers can build their understanding. If you provide your students with written materials, whether online or printed, avoid long sections of text in favor of shorter, easier-to-understand chunks.

  1. Keep the future in mind

One of the biggest issues of inadequate counseling is limited focus. When the advice a student receives is just about rights and responsibilities, some students may fail to understand the long-term impact their repayment strategy can have on their future. Effective student loan exit counseling not only covers details of the loan, like the interest rate and loan servicer, but also how repaying their loan fits into the student’s bigger picture in terms of other major investments down the road, like a mortgage or saving for retirement. This information also increases the student’s overall financial literacy, which can reduce the likelihood of default.

These three small steps – personalizing, simplifying, and expanding the focus of your student loan exit counseling – can have a considerable and positive impact on your students. Not only are you helping them understand their immediate financial obligations, you’re giving them information that will serve them well beyond graduation. Your institution has done a great job getting your senior class to the finish line. Now help them cross it.

 

Featured Image: Shutterstock/RawPixel
on-campus-financial-literacy

Empowering Students Through On-Campus Financial Literacy

April 9, 2018

on-campus-financial-literacy

In spite of having some of the best colleges in the world, the United States still falls short when it comes to financial literacy, ranking 14th behind other developed nations. 30% of adults with a mortgage in the United States are unable to perform basic interest calculations on their loan payments and only five states require high school students to take a stand-alone personal finance course. Colleges and universities have stepped up to address this need and more institutions are providing their students with on-campus financial literacy courses. If your school doesn’t yet offer this added service to its student body, there are powerful arguments in favor of doing so.

  1. Reduce your default and delinquency rates

Students who understand personal finance and how to manage their money are far less likely to let their obligations slide. A student with a reasonable budget and understanding of loan terms will build their repayments into their monthly expenses. This, in turn, helps your students be more confident and knowledgeable about tackling their loans post-graduation.

  1. The student debt landscape is constantly changing

College costs continue to grow, and there aren’t many signs that growth is slowing. Moreover, as the Perkins loan program comes to a close, more students will likely turn to a patchwork of private loans to fund their education, each with different repayment terms. This means it’s more vital than ever for students to be prepared to manage their obligations once they finish their schooling. Students must understand before they sign the promissory note how each loan will impact their future and how – or if – they can afford it.

  1. Reinforces the idea that your students matter to you

In the crowded marketplace, having a differentiator like an on-campus financial literacy course can separate your school from others competing for a student’s attention. Offering extensive but practical financial literacy resources tells your students that their institution is doing everything it can to get them ready for the real world. Financially literate students are more likely to not only pay off their debts, but also establish long-term goals, like saving for a home or a comfortable retirement.

As you contemplate how on-campus financial literacy courses will best meet your students’ needs, keep this in mind: the classes you offer must be comprehensive to be effective. The most common criticism of personal finance courses is that they simply go over terms of the loan or student financial agreement, rather than providing real-world understanding of money management. To be useful, your financial literacy course must examine everyday financial issues, like creating and balancing a budget, managing a line of credit, and protecting their credit bureau scores.

Unpacking the reasons for our country’s lack of financial literacy can be challenging and solving the issue will take time. But the arguments in favor of addressing it are undeniable. Improving your students’ financial literacy has a profound impact on their ability to become successful, self-sufficient adults.

 

Featured Image: Shutterstock / Iryna Tiumentseva
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5 Factors that Contribute to Student Loan Delinquency

February 19, 2018

student-loan-delinquency-factors

When it comes to issues facing financial aid departments, the rapid increase in student loan delinquency is the top concern for most loan professionals. Analyzing data directly from the Department of Education, the Consumer Federation of America released a study in 2017 showing that a total of $137.4 billion in defaulted balances, a 14 percent increase from 2015. While there are many factors contributing to this growing crisis, five in particular should catch the attention of schools looking to decrease their Cohort Default Rates (CDR).

  1. Dropouts are more likely to default

According to a study initiated by the Consumer Reports National Research Center, college dropouts comprise 63 percent of defaulted student loans and are four times more likely to default on their loans when compared to their fellow students who finished their degree. Informing students about the rigors of university academics before they enter school can make a huge difference in ensuring students make the right choice of institution. Once on campus, providing an engaging environment in which students are both challenged and supported can also make a dramatic impact in the overall student retention rate.

  1. Defaulters often lack financial literacy

For more than 30 years, the federal government has required student loan borrowers to receive financial counseling prior to graduation. While this information can help a student avoid delinquency, the type of counseling a student receives can vary greatly from school to school. Some institutions provide in-depth assistance with money management, setting a budget, and understanding repayment options, while others provide just the bare minimum information as required by the Department of Education.

Schools should strive to provide comprehensive, personalized data to their students and help them understand strategies that lead to financial success. Dedicated student outreach initiatives can play a valuable role in this effort. Many institutions are choosing to outsource their student contact centers, allowing their staff to focus on more pressing duties.

  1. Salary expectations are outpaced by reality

Many students who fall behind on their loans do so because their dreams of grabbing a high-salary job right out of college do not match the current reality of the job market. After two or four years living in the relative quiet of a university, graduates are often surprised at the challenges of landing a job that matches their degree and managing their own household expenses. Schools that are committed to guiding their students to the right path from the start – rather than waiting for the exit interview – are helping their future alums increase their chances of success.

  1. Underemployed, unemployed, and giving up

Closely tied to the factor of unrealistic salary expectations is unemployment. While the official national unemployment rate has held steady recently at 4.1 percent, the U-6 rate, or the rate that also includes individuals who are underemployed and those who have abandoned their hopes for obtaining a job, is double that at 8.2 percent. This means that many students are working, but in a position well below what their degree qualifies them for. Underemployed individuals have much greater difficulty meeting their financial obligations, and undoubtedly prioritize necessities such as rent, food, and utilities above their student loan payments.

  1. Decrease in state funds

States have been steadily reducing their funding for higher education, which not only contributes to delinquency, but also to the overall rise in college costs. While the jury is still out on just how much state divestment affects tuition, there’s little debate that decreasing financial support at the state level means an institution must find funding elsewhere – and that often means increasing tuition for students. According to one recent study, for every $1,000 cut from per-student state and local appropriations, the average student can be expected to pay $257 more per year in tuition and fees.

While there’s not a lot schools can do to affect the national unemployment rate or declining funds from the state level, focusing on factors that are within your institution’s control. Managing dropout rates and increasing student financial literacy can help your students avoid student loan delinquency.