"Community colleges faced with negative perceptions over loans and a growing number of borrowers defaulting are facing pressure to provide better financial literacy education to their students. For many community colleges, only a small minority of students borrow, however, a high rate is problematic to the borrowers and the college," according to Inside Higher Ed.
"Officials at Ivy Tech Community College in Indiana revamped their approach to helping students understand the intricacies and consequences of taking out loans and have seen the system's three-year cohort default rates decrease to 18 percent. In 2014, the system had a 22 percent default rate, according to federal data.
'We know the key to successful repayment is their ability to pay,' said Ben Burton, chief student financial resources officer, during the American Association of Community Colleges national conference here, adding that it's important that students complete college, get a job and earn a salary that helps them pay their loans. 'In some of our institutions in Indiana, some of our students earn more leaving with an associate degree than they do with a bachelor's degree … We have to get them on the path.'
Burton said lowering default rates should involve everyone at the college, including those outside the financial aid office. That means better preparing these students for high-wage jobs so taking out student loans doesn't lead to defaulting.
Ivy Tech hired Student Connections, a loan default prevention management company, that took on the responsibility of lowering borrowers' chances of defaulting by helping them to understand their finances and advocating and serving as an interpreter for students with loan servicing agencies.
Burton said the college had limited resources to provide the one-on-one financial counseling needed to truly help students understand their financial situations.
'When it comes to repaying a student loan, it's confusing and it's not like repaying a car,' said Steve Queisser, vice president of strategic partnerships at Student Connections. 'The real key to default prevention is retention.'
Often students don't understand that a financial aid award letter may include loans, or they may not realize that they're still on the hook for loans even though they didn't graduate, Burton said."
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Publication Date: 5/2/2018