Of the 3,436 career colleges that participated in federal financial aid programs in 2014-2015,1 approximately 1,400 — or nearly 41 percent — will not qualify for continued participation under new Gainful Employment regulations, the Department of Education estimates.2 Of course, high student loan default rates hurt students, but they also put educational institutions at risk of losing their Title IV eligibility. This makes promoting student loan literacy a priority. Offering student loan coaching is one way schools can help ensure that students follow responsible loan management practices.
Nearly half of students from households with annual incomes below $50,000 aren't even aware that Pell Grants exist, according to a recent survey by the New America Foundation.3 Educate students about the financial aid and loan opportunities available to them. Do such things as:
- Provide answers online to frequently asked questions about loans
- Hang up posters around campus and announcements on websites, blogs and social media posts, pointing students toward the resources available to them
- Work with high school guidance counselors to boost student awareness of these resources
- Host a live or virtual bring-your-own-laptop event where students can fill out their FAFSA application online with qualified experts there to assist them
Reach out to Students Who Need Help
Every year, the Department of Education reports on student loan default rates, separating the data by variables such as type of educational institution and loan type.4 Use this information (or collect and analyze your own data) to identify the students at your institution who are most at risk of loan default. For instance, you might find a correlation between loan default rate and part-time status, low GPA or other variables. Focus your program's promotional efforts on reaching out to students who are most in need of help. Offer them special opportunities to receive free financial coaching and information.
Provide Assistance Using a Variety of Channels
The more communications options you provide students, the higher your odds of assisting them effectively. Communicating through websites, teleconferences, webinars and workshops can help you deliver general information to groups of students, leveraging busy counselors' valuable time. For more individualized assistance, in-person counseling can be supplemented by virtual communications tools such as live chat and email. Financial aid apps can also help you assist students effectively.
Start with the Big Picture
For many people, a student loan is their first major loan, and they lack the financial experience to develop a realistic loan repayment plan. Educating them in financial literacy can help them see how repaying their loan fits into the big picture of their financial future. Discuss their income potential and projected expenses to help them understand their income-to-debt ratio. Show them how to make and stick to a budget so they can meet their loan repayment obligations. Cover basic information about how credit scores work and how to avoid running up excessive debt.
Reinforce with Reminders
Reinforce what your students learn and encourage them to implement these strategies. Send students home from their loan counseling session with an exit package they can use to follow up with from home, and send periodic emails that remind them to stay on top of their loan payments and budgeting best practices.