As student loan borrowing and financial literacy continue to be issues of growing national concern, many financial aid offices are taking proactive steps to better educate their students on loans, personal finance, and budgets. NASFAA recently reached out to its membership to find out how aid administrators are helping their students become more financially literate – here are four strategies your peers have found success in using.
Santa Barbara City College Director of Financial Aid Brad Hardison said that his office tries to counsel its students to think about the long-term impact of student loan debt and repayment, including the need to budget repayment into their monthly expenses.
“We encourage students to take what they need [in the beginning of the term] and then come back for a loan increase,” Hardison said. “It’s a little more work for us but I’d rather them take what they need and then come back if they need more.”
The goal, he said is to try to “change the dynamics” from borrowing the maximum loan amount to only borrowing what the student needs for their educational expenses.
“It’s all about informed choice,” Hardison said, adding that for some students, their interaction with his office “is the first time they’re even talking about budgeting and expenses. Sometimes it’s the first time they’ve had this much money and we’re just trying to change the way they think about borrowing.”
Many aid offices have – and require students to fill out – personal budget worksheets to help illustrate their monthly expenses and how borrowing and repayment may impact that.
During the entrance counseling period at Michigan State University’s College of Law, students are automatically given a budget for all education-related expenses that includes minimal amounts for personal expenses, such as room and board, transportation, and other things. The so-called Thrifty Budget, Director of Financial Aid John Garcia said, was designed to give students a minimum amount of money that they can use while in school to help avoid overborrowing.
Students looking to opt out of the Thrifty Budget and use a budget that is higher are required to complete a budget worksheet, which needs to be approved by Garcia before they can borrow more money to meet the new budget needs. After approval, Garcia sends the student a letter outlining the new budget, what they have borrowed and the general terms of loan repayment for different loans.
“We’re trying to put it in black-and-white that this has consequences and to remind students about what they are borrowing and the lifestyle style they may live,” Garcia said. “Students come in with inaccurate expectations sometimes … [and] the budget helps visualize what they have to work with.”
Coconino Community College in Flagstaff, Arizona also requires students to utilize a personal budget worksheet during the entrance counseling process. Director of the school’s Office of Student Financial Aid and Veterans Services Bob Voytek said that the experience has been educational for many students who may have never tried to create a budget. A realistic budget that will help the student plan for their future will include living and other personal expenses, but also must include student loan repayment for when they have completed their education, he said.
Sometimes, the best counseling for students comes from their peers. At least that seems to be the case at Truckee Meadows Community College in Reno, Nevada, where the financial aid office’s successful FLAMES peer-counseling program has helped numerous students over the last year.
Funded through a three-year grant from USA Funds, FLAMES currently employs seven students who serve as peer mentors and financial literacy counselors. According to Financial Literacy Specialist Jeannette Smith who oversees the program, these students are selected through a rigorous application process and trained to discuss financial literacy, personal budgets, and student loan borrowing, among other topics. Each mentor is tasked with counseling up to five students, who they work with continuously over the course of several months, as well counseling walk-ins.
“Part of it is helping the students realize that their financial aid is not meant to be the be-all-end-all,” Smith said of the goals behind the peer counseling. Other goals include helping students understand what they should use their aid for, what other resources are available to them, and to answer any finance-related questions students may have but are not sure where to address.
As for the mentors themselves, Smith said the program helps them build “a host of skills,” such as public speaking, teamwork, research, and networking. Mentors are paid through the USA Funds grant and are also able to receive credit for a student leadership course by working for FLAMES.
The program “is a way to recognize them and build more on their professional development,” Smith said, noting that by the end of the 2014-15 year she hopes to have at least 10 student mentors working for FLAMES.
While many campuses utilize budget worksheets or counseling efforts, it’s important to be aware of your campus’ size, resources, and culture, according to the aid administrators we spoke with.
Garcia suggests schools “start small, whatever that might mean. It might be something to do with the [cost of attendance], or it could be the way the loans are packaged themselves.”
Also important when starting a new program or tactic is to obtain “buy-in”—meaning acceptance and willingness-- from the office and broader campus administration, Smith said. “Our staff here is phenomenal and each one helps develop and teach our students… so they know who to go to for bigger questions or who to send them to,” she said. That buy-in has helped with the future of FLAMES, which has been approved by the college for continuation even after the USA Funds grant has expired.
The financial aid office “has an important role to play in teaching students how to manage their money because we’re the ones giving them the money,” Hardison said, adding, “We don’t have to be the only ones but ultimately… it kind of makes sense for us to help in those discussions or lead them.”
Does your campus have efforts in place to teach students budgeting and financial literacy? Share your experience in the comments section below!
Publication Date: 9/18/2014