Colleges Experiment With New Methods of Providing Financial Aid Counseling
Posted By Eliana Osborn on July 27, 2016 at 1:13 pm
Before you get a student loan, you have to attend some training. Every school does things a little differently, but there are counseling requirements for entrance into the federal loan system. There’s a good reason for this, though students may not look forward to it: Student loans are a financial contract with serious responsibilities.
Now the Department of Education is letting schools try different ways to fulfill the entry and exit counseling requirements. Meeting with students just at the start and end of their college careers doesn’t allow for targeted counseling. Instead, the sessions are fairly general and don’t address specific situations.
What some schools want is to require more financial aid counseling for their student borrowers. That would include interim advisement about how much is being borrowed and what repayment will look like. Critics say additional counseling adds an undue burden on students who need loans—often those who are low-income in the first place.
Advocates of the change want to better support students in their borrowing decisions. They also want to experiment with different communication methods to see what counseling makes a difference to students: sit down sessions or something less invasive, such as email reminders.
The big challenge of financial aid counseling
One of the primary challenges for student loan borrowing concerns those who don’t graduate. They take on serious debt without getting the career and earning benefits of a degree. Repayment is difficult, even with income-based plans. Default rates are high which leads to credit repercussions for borrowers. Better counseling during the years when student loans are being taken out might keep students on track with their plans.
The Obama administration has pushed for increased cost transparency in the higher education market. Tools to compare expenses have become standard, if imperfect. Interactive calculators also allow students to estimate repayment costs and total borrowing. More information about financial literacy and planning generally is available through federal education websites. All of these moves have the same goal of informed students making smart financial decisions.
Entrance financial aid counseling, when students first receive a federal student loan, can include a lot of information. There can be tests and worksheets, all designed to make sure students understand what they are getting into. Such activities can be sobering. The problem is, this happens just once. New loans can be acquired every year without having to revisit those first exercises.
As a handful of schools experiment with expanded counseling, everyone will have access to better data about what makes a difference in student borrowing habits. Something as simple as a yearly online worksheet has the potential to get more students on track for loan repayment. Community college students, at the greatest risk of default, stand to benefit the most if counseling requirements are revised.