College Loan Counseling Process Often Falls Short for Students

Policy
Posted By Candace Talmadge on September 29, 2016 at 3:34 pm
College Loan Counseling Process Often Falls Short for Students

Editor’s note: On Monday, GoodCall.com reporter Candace Talmadge examined the situations of three college graduates struggling with student loan repayments. Today she examines the effectiveness of college loan counseling.

If an outside observer graded higher education institutions on their effectiveness in educating incoming students and graduates about the impact of college loans, they might get a C minus – maybe even a D. “They’re meeting the minimum requirements,” said Robert Collins, vice president of financial aid for Western Governors University.

Loan counseling standards are set by the U.S. Department of Education. At present, they consist of entrance counseling before students receive any loan funds and exit counseling upon graduation or leaving the institution. Collins says the thinking behind this counseling is to refrain from placing too many barriers in the way of students obtaining funding for their college education.

These days, most loan counseling is conducted online, but even the insiders admit that does not always work well. David Sheridan, director of financial aid at the Columbia University School of International and Public Affairs, notes a common problem. “As one event during however many years of college, retention of the details of these counseling sessions is problematic,” Sheridan says. “I can’t tell you how many students have played the “nobody told me” card while I have the proof that we did tell them right in front of me.

Dart Humeston, director of financial aid at Barry University, agrees retention is an issue. “A generation born texting and living online 24/7 has evolved and can complete the entire online student loan counseling session, answering every question correctly, and an hour later have no memory of the process.” He added that face-to-face loan counseling is far more helpful, but schools do not have the resources to provide it except to a very small portion of their students.

One loan counseling approach doesn’t fit all

The issue is complicated by the fact that different student populations have different needs when it comes to loan education, Collins points out. Most students attending elite schools do not need as much attention when applying for financial aid as lower-income students at community colleges. This latter group is at much higher risk of dropping out before they earn a degree. “Most people struggling with college debt never completed their degrees,” Collins adds.

“Nobody educated me on the cost of student loans until I was already in college,” says Candice Tucker, a 24-year-old public relations associate. She finally began to understand the financial consequences of her debt in her junior year, when she was required to attend an hour seminar on how to manage a check she would receive because the cost of her tuition and other expenses was less than the amount of money she borrowed.

Peter Boucher, a 27-year-old bartender, gave absolutely no thought to the consequences of going into $80,000 of debt for his bachelor’s degree in horticulture while he was in college. “My parents often said to me, ‘You know, you have to pay this back.’ At the time, it just didn’t connect.”

Sheridan, at Columbia, sympathizes with the struggles borrowers face, but he says blaming a “lack of counseling” is misleading. “It’s there,” he says. “It might not be perfect, it might be a challenge to deliver effectively, and knowledge of the most important terms of loan still doesn’t help the student get a well-paying job in the future … but the counseling is definitely there.”

Kyle Gallagher, senior vice president of business development for GradFin, which helps students refinance their loans and offers loan assistance programs to employers, approaches the issue from a different angle. “How often do borrowers really want to understand the consequences of debt?” he muses. “A lot of people are very month-to-month focused.”

The results can be devastating, according to Gallagher, who sees the consequences and the struggles every day. He recently counseled a young lawyer whose non-subsidized loan for law school rose to 9 percent interest by its third year; the client claimed no knowledge of the interest-rate level.

Repayment efforts can turn sour

Gallagher also talks to graduates working lower income jobs who are put into repayment plans that cover only the interest. If they miss a payment or two, there is almost no way for them to catch up. “If you have $80,000 in debt and are making $30,000 or $40,000 a year, you are just not going to get out of debt,” he says. He also worked with a college loan borrower who couldn’t make loan payments for five years. During that time, the debt ballooned from $40,000 to more than $70,000 because of interest and penalties.

It’s no surprise, then, that 36 percent of millennial graduates who responded to a poll conducted earlier this year reported they would not have gone to college if they had known how much it would cost them. Fifty-seven percent said they regret taking out as many student loans as they did. The poll surveyed 501 U.S. millennials 18 to 35 years old who are college graduates (2- or 4-year degrees or postgraduate/professional degrees) and have student loans.

Citizens Bank’s Millennial Graduates in Debt survey found that graduates with student loans have to make trade-offs to afford their monthly student loan payments. Fifty-four percent curtail travel; 50 percent cut back on shopping for clothes, shoes and accessories; 46 percent reduce spending on entertainment and social events; 45 percent eat out fewer times; and 40 percent limit the amount they can afford for rent or mortgages. Fifty-seven percent said they regret taking out as many student loans as they did. The poll surveyed 501 U.S. millennials 18 to 35 years old who are college graduates (2- or 4-year degrees or postgraduate/professional degrees) and have student loans.

Citizens Bank’s Millennial Graduates in Debt survey found that graduates with student loans have to make trade-offs to afford their monthly student loan payments. Fifty-four percent curtail travel; 50 percent cut back on shopping for clothes, shoes and accessories; 46 percent reduce spending on entertainment and social events; 45 percent eat out fewer times; and 40 percent limit the amount they can afford for rent or mortgages.

Candace Talmadge
Candace Talmadge has been a professional writer since 1976. She has been on staff or reported and written freelance for media that includes Adweek, Advertising Age, BusinessWeek, the Dallas Times Herald, the International Herald Tribune, The New York Times, and Reuters America.

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