By Owen Daugherty, NASFAA Staff Reporter
Too often, borrowers are saddled with burdensome student loan debts and leave school unable to make payments on loan amounts they probably shouldn't have even taken out in the first place.
At Western Governors University (WGU), the school sees it as its role to educate their students on the amount of loans they need in order to continue their education and degree pursuit.
That approach, called the Responsible Borrowing Initiative, has already earned the online university accolades and recognition. Most recently though, WGU was awarded NASFAA's 2021 Gold Star award, which recognizes innovative ideas in financial aid.
The foundation of the initiative is built on understanding what students need to graduate with as little debt as possible — and WGU has tailored the approach to best fit its students. WGU recommends to students in their financial aid packages how much to take out to pay for school, and in most cases it is considerably less than what they are eligible to borrow by Department of Education (ED) standards.
"You have to know the demographic profile of your students. That's the population we serve," said Bob Collins, vice president of financial aid at WGU. "If [a student] needs help paying for tuition and fees, we help them with financial aid. But previous to 2012-13 when we started this program, we just awarded up to annual limits and students accepted the annual limits and got these excess funds checks."
Knowing that WGU served a nontraditional student population, where virtually all who enrolled brought with them some college experience and student loan debt yet no degree, meant students were often working a full- or part-time job and only needed loans to finance their education.
For award year 2021, WGU's data show 46% of undergraduates carried an average prior debt of $19,399. Further, with a median age of 37 and a majority having prior college experience, it was important for the school to show a full and personalized picture of their debt burden and the options to pay it off so they can make informed decisions about their borrowing.
A major element behind the success of the Responsible Borrowing Initiative and the personalized financial aid plan for every student is WGU's use of what it calls a "Student Loan Scenario Calculator." The calculator recommends that students borrow only their "unmet direct costs'' — tuition and fees minus any grants or scholarships. The personalized plan includes information about the annual cost of attending WGU as well as the impact borrowing a certain loan amount will have on their ability to repay.
Since WGU's average direct costs per student amounts to about $7,500 annually, when the school recommends only borrowing enough to cover the direct costs and students heed the advice, they are likely to leave school with well under the national average of student loan debt that borrowers hold, Collins said.
"When we started offering the recommended amounts and just nudging them in a different direction, that's when we really started to see the impact," said Patti Kohler, director of financial aid at WGU.
The nudging is apparently working. In the first two years in which WGU made recommendations about loan amounts to students, in total students borrowed about 40% less than they did before the program launched in July of 2013. The average student went from taking $7,870 in loans to $4,717. Now, roughly two-thirds of students accept the financial aid office's recommended loan amounts.
Prior to the initiative's founding, the average debt for an undergraduate at WGU who borrowed to attend school was $21,102. In 2020, that number had fallen to $14,253, compared to the national average debt at graduation of nearly $30,000.
"Student loan debt is problematic, and I think the schools need to look at affordability and accountability. Institutions need to look inward," Collins said. "What are we charging in tuition and what are we recommending students borrow?"
Much to WGU's delight, responsible borrowing is starting to take hold at other schools and at the state level. Tennessee recently signed into law the Responsible Borrowing Initiative Act, which requires public higher education institutions to provide pertinent information to students about available financial aid, including loans and work-study funds.
WGU envisions other schools adopting the calculator, with Kohler noting the important voice financial aid offices have at their institutions to advocate for best practices that ensure student success both in school and after they attain their degrees.
Kohler and Collins also hope aid offices feel emboldened to give students all the information up front in a presentable way and engage with them in conversations about how borrowing will shape their future.
"We can help drive those conversations with individual students on making long-term versus short-term choices and how that impacts their long-term financial health," she said.
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Publication Date: 8/6/2021