Study Provides Historical Context for Loan Counseling

Charlotte Etier, NASFAA Research Analyst 

A report released today by TG, in collaboration with NASFAA, explores the ever-evolving policy changes and the complexity of the federal student loan programs. “Informed or Overwhelmed? A Legislative History of Student Loan Counseling with a Literature Review on the Efficacy of Loan Counseling” provides a comprehensive overview of loan counseling from it’s introduction in the 1986 Higher Education Act reauthorization.

The report details a number of major legislative additions to the loan counseling requirements over the years, including the introduction of estimated repayment burden information beginning in 1989, electronic loan counseling materials in 1999, the  National Student Loan Data System (NSLDS) in 2002, and information on the loss of eligibility for student loans in 2013.

Currently a total of 28 topics are required to be covered during loan counseling. “The proliferation of mandated topics seems to stem from federal policymakers’ concern about the lack of college affordability and the economic uncertainty student borrowers face after college,” explained Kasey Klepfer, the report said. “Though well intended, growth in the number of topics that students cover in counseling causes many to grow apathetic during their learning experience.”

A literature review done for the report revealed that most loan counseling studies rely on survey data or focus on group feedback from students and financial aid advisors instead of using randomized research designs or advanced evaluation methods. The report,  which also explored research related to the delivery method and timing of counseling and its effects on learning outcomes, found research gaps related to face-to-face counseling. Overall, the author found three components determine the effectiveness of loan counseling:  

  • The complexity of information
  • The timing of delivery
  • The method of delivery

The general consensus, the report concluded, is counseling that is provided early and often will allow students to better retain the information and take steps to change their behaviors than information provided in a “just-in-time” moment.

As previously shared in Today’s News this report, part of a multiphase research project, is the second in a series of reports by TG on student loan counseling in the United States. TG’s research team released the first report on the efficacy of loan counseling, “From Passive to Proactive: Understanding and Improving the Borrower Experience with Online Student Loan Exit Counseling,” in February. Remaining topics include: an interview and observation-based study on the borrower experience with online student loan entrance counseling and a study of the promising practices in financial literacy training and student loan counseling currently employed at schools whose student loan borrowers outperform expectations. A final paper will synthesize the findings and implications of the four studies and offer broader conclusions on the policy and practice of student loan counseling. 

“TG's work provides much needed historical context that sheds light on how the loan counseling system we have today came to be, and how it can be improved. We look forward to continuing to collaborate with TG on this important and timely issue,” said NASFAA President & CEO Justin Draeger.

NASFAA will continue to share these studies in Today’s News as they are released throughout 2015.


Publication Date: 3/24/2015

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