Despite the risky and complicated nature of student financial aid – particularly with student loans – college financial aid administrators are often restricted in how frequently and in what manner they can counsel students about their borrowing options.
During a panel discussion on Tuesday hosted by the Board of Governors of the Federal Reserve System, a group of financial aid professionals discussed the challenges financial aid offices often face in trying to help students make responsible financial decisions, and their recommendations for improving student loan counseling. In collaboration with NASFAA, the Federal Reserve Board’s Division of Consumer and Community Affairs produced a report, published on Tuesday, based on focus groups with financial aid administrators that focuses on the challenges they face with student loan counseling.
Overall, the report found that while many institutions offer loan counseling programs in addition to the required entrance and exit counseling, many also struggle to communicate with students and draw them to these programs, and often lack the resources necessary to target certain student populations that might be more at-risk for defaulting on their loans or making irresponsible decisions. Additionally, some on the panel noted that the required entrance and exit counseling is not always the most effective way to teach students about financial literacy and their options when it comes to student loans.
“They go through the motions, may or may not retain a lot of what they heard and, under the current requirements, the next time they might hear something about their loans … may be in exit counseling,” one financial aid administrator said in the focus groups.
When loan counseling began several decades ago, “the presumption was that this would be an in-person experience,” said Jeff Webster of student loan guarantor TG. Since then, the five topics required to be covered in counseling have grown to 28, he said.
“That causes a lot of problems,” Webster said. “It’s a lot of dense material to be covered, and it presents information that is often irrelevant.”
The financial aid administrators who participated in the focus groups made several recommendations to improve loan counseling, including having the ability to require additional financial aid counseling, giving general financial education to students sooner (in primary and secondary school), and simplifying and modernizing the online counseling modules provided by the Department of Education (ED).
Clint Young, of Northern Virginia Community College, said some financial aid administrators would also like the ability to reduce loan amounts based on the attendance level of students.
Young said sometimes he sees students come through his institution taking remedial courses part-time, but still borrowing the maximum amount of loans available to them, despite the fact that those credits won’t count toward their degrees.
“They'll exhaust their loan eligibility before they even receive an associate degree, much less a bachelor's degree,” Young said. “Financial aid administrators would like the discretion to require additional entrance counseling or other interventions as they see a need.”
Theresa Cry, of Virginia Commonwealth University, said she would also like to see “warning flags” of sorts sooner and have the ability to talk to students about where they stand with their cumulative debt and total debt limits.
“We need to start having the conversation midway,” Cry said.
Charles Pruett, of Georgetown University Law Center, said he would also like to have the resources to reach out to parents to speak with them about helping their children learn to make responsible financial decisions.
“The habits our students have are primarily based on their experiences as a young adult, or even a child,” he said. “Some families ... do make very little money, but they have ingrained that into their children in how to be good stewards of their own finances.”
But the reality for now is that financial aid administrators have to compete for institutional resources to reach students, and often compete with other campus entities for students’ time.
“We do find it difficult to offer in-person counseling,” Young said. He added that his institution often partners with other organizations to provide some of its financial literacy programs, and sometimes has banks come on campus to offer financial literacy presentations.
Cry said she works around limited resources by making outreach a priority. “We have a lot of other competing interests, and things we’re required to do, but outreach is critically important,” she said. Cry said she uses tools already on campus to reach students where they are, such as coordinating times to work with the campus TRIO program, and facilitate peer-to-peer coaching with the school of business.
Overall, the financial aid professionals said they try to bring the conversation about financial literacy and student loans to the forefront, and find ways to continually remind students of the resources available.
“You have to make it something that they can’t avoid,” Pruett said. “You get them at Open House. You get them again at orientation. We slide ourselves in, and there’s no opportunity for anyone to get up and leave. Working with other groups on campus … is the way to get your toe in the door. You have to be multi-pronged.”
Publication Date: 11/30/2016