Four days before graduating, 366 seniors at Texas Christian University (TCU) got some surprising news from Director of Financial Aid Michael Scott: The financial aid office had cut their student loan burden by $1,000-$10,000 each.
Scott’s team used about $1.4 million set aside by the institution’s trustees to shave off part of the principle owed by the seniors, all of whom had borrowed at least $10,000 and demonstrated financial need. How much each student received was determined by a formula created by TCU’s financial aid officers, which included a weighted average of financial need combined with total debt.
On average, students received $3,940—which triggered an outpouring of appreciation, Scott said.
“The overriding sentiment was, ‘This makes me feel like my school cared for me,’” Scott said. “It was a nice change from the usual at this time of year – which is, ‘Why didn’t you give me more money?’”
This is not the first time TCU’s financial aid officers have reduced loan burdens for some students; however, it is by far the most widespread. In the past, the reductions were piecemeal – if the financial aid office had some leftover funds, they might reduce the loans of a few students administrators knew had been struggling or who had unusual circumstances.
Even this year, not every borrower in the graduating class received financial help. In total, 614 students had borrowed for college, but had not met the debt and financial need measurements determined by the aid office.
For that reason, the loan reduction grants were quietly announced with very little fanfare. Scott sent emails directly to recipients, and he worked with TCU’s public relations department to determine they wouldn’t notify local press.
“How do you keep it at a fairly subdued level so that you don’t set expectations that you might not be able to deliver on in the future?” Scott noted.
Aid officers also diligently thought through the timing of the financial support. Financial aid officers opted to save the funds till the end of the year – rather than packaging students with a few extra thousand dollars last spring – in an attempt to maximize effectiveness, Scott said.
“I just knew deep down that they were still going to take out the loans if we did it upfront,” Scott said. “It wouldn’t really do anything to reduce their debt. It was something that students weren’t counting on; I just think that had more impact than had we given an average of $4,000 more at the beginning of the year.”
If your office is considering a similar loan reduction grant, Scott offered the following additional advice:
1. Be careful with verbiage: “We were very careful in how we talked about this – we’re not repaying their loans,” Scott said. “We’re just reducing the debt at the end of the term.” Repaying loans could have tax implications for the borrowers, he added.
2. Think strategically: The feel-good grants have potential negative implications to work through, Scott said. “If it starts to become expected, we’re afraid students might borrow more if they know their school is going to pay some of it off when they graduate.” The fact that some borrowers don’t receive any relief also creates a delicate situation for administrators to tackle, he added.
3. Seek outside expertise: “This was a purely financial aid issue, but it got us talking with our marketing and communications office, our financial office, and our vice chancellor to determine if this is something we should make a big deal of, or something we should just do quietly,” Scott said.
Their decision to keep the grants fairly quiet likely made the news even more special for graduates, Scott posited, as it made clear the underlying intention was to truly help the students, not gain notoriety for the institution.
“There’s no doubt that these students left here feeling pretty good,” he said. “The common thread in the responses I got was ‘I knew all along this was a great place; this just reinforced that.’”
Publication Date: 6/10/2014