The $1 Trillion Problem: Protect Your Institution from Student Debt
The pressure institutions are facing from the growing student loan debt crisis is felt by all departments, from financial aid to admissions. Schools are struggling to justify tuition costs to prospective students, as well as to ensure recent alumni leave pleased with the institution, despite having student loan debt. In this web seminar, originally broadcast on November 13, 2012, representatives from American Student Assistance (ASA), St. Petersburg College, and Emerson College discussed strategies that will help students understand their finances and debt, and how teaching students fiscal knowledge will benefit both the student and the institution.
American Student Assistance® (ASA) is a private nonprofit whose mission is to empower students and alumni to successfully manage and repay their college loan debt. Established in 1956, ASA® is the oldest student loan guarantor in the country, and we manage 1.4 million borrowers.
Our newest offering is a game-changing membership program called SALT. SALT offers students and alums benefits including financial education, loan advice from expert counselors, and help finding jobs, internships, and scholarships. And by teaching real-world money skills, SALT helps students and alums reduce their school loan debt, improve loan repayment outcomes—and increase their financial literacy, for life.
A student’s ability to manage their debt not only affects every student on campus, but also every administrative office. Your admissions department needs to justify why students should borrow money to attend your campus. The business department needs to work with students to help them understand their finances and pay their bills. The careers office needs to help students find jobs that align with the debt they have incurred. Your alumni office needs to make sure students leaving your institution are pleased with the experience they had.
Student loan debt impacts a significant number of students. Fifty-nine percent of students borrow to attend college, and the average indebtedness is on the rise. For the average debt of $25,250, repayment will be $291 a month for 10 years on the standard repayment plan. As those in alumni relations know, the first 10 years after graduation are key in keeping your alumni engaged and willing to donate to your institution.
Students do think about their debt in relation to their institution. A recent study found that 26 percent of student borrowers allow their debt to negatively shape their perception of their institution. Students also believe it is the school’s job to provide information about student loans and other finance options. While some schools are already doing this, 65 percent of borrowers were surprised about some aspect of their loan. The majority of students who could benefit from an income-based repayment plan have not taken advantage of it.
Ideally, we can work together to improve financial aid debt. Students and their parents should be informed about different loan types so they can make well-informed decisions. Students should be aware of educated borrowing so they can avoid borrowing more than they need to. Also, we need to encourage students to explore scholarships, work, and internship opportunities, and other non-loan-based assistance.
Although the reality of student loan debt is daunting, there are solutions an institution can put in place to tackle the problem. This involves helping your borrowers understand the choices they are making up front, as well as the options they have during repayment. Students should also be educated on other financial topics, including credit reports, credit scores, saving, and investing, in a way that is relevant and timely.
St. Petersburg College is a large state college with over 32,000 students on 10 campuses. Seventy percent of our students are independent and their average age is 27. Last year, there were 25,000 financial assistance recipients. Total disbursed loans were over $100 million.
Our goal with our debt management plan is to have students properly manage their debt, as well as the money in their pockets. We wish to lower borrowing levels, delinquency, and our Cohort Default Rate. As part of our Cohort analysis, we discovered our average defaulters attend between 3 and 6 semesters and receive poor grades.
Students who withdrew tended to be either working toward a general associate’s degree or were in the nursing program. The average amount students defaulted on was $9,826. Most interesting to us was that many students who became delinquent withdrew from the college and then returned. When they re-enrolled in school, they did not request a deferment or forbearance. To address the situation, we have already delivered student loan management information to over 25 departments on campus and will continue to work with more departments.
Our president also shared this information to over 700 faculty members as a welcome back event. Debt management has been included in 50 of our “college life” classes. We are also using social media to get the word out. Our on-campus marketing plan includes buttons, flyers, t-shirts, and other materials to promote ASA and its finance management program, SALT.
Results so far include over 3,500 students activating SALT accounts. We have also added a debt management section on our financial aid website. Our on-campus and online outreach provide a consistent message to students. In the future, we plan to send a letter to all borrowers, encouraging them to create a budget now so they can be prepared for the future. We will include debt management screensavers on all student computers in the library, as well as certify staff and students on debt management so they can counsel borrowers.
Emerson College is a private, four-year institution in Boston, Massachusetts with about 4,500 students. Our yearly cost for a full-time, on-campus student is just over $48,000. About 65 percent of students receive financial assistance.
We have launched a new program called Money Matters. The issue here isn’t necessarily our default rate, but, in general, our students are ill prepared to be financially savvy adults. To begin getting the word out, we started with a launch event for faculty and staff. The event included a PowerPoint presentation introducing the program, as well as tables staffed by counselors to offer financial advice. A similar event for students resulted in an excellent turnout.
Since then, we have been contacted by individual departments, such as the athletics office, wanting us to speak to their students directly. We are working to get our logo on various pieces of literature so it becomes universally recognized by our students. Our on-campus displays are large, with bright colors and attention-grabbing phrases. We are also doing on-campus workshops, social media promos, and handing out swag. Our swag includes hand sanitizer with our logo and a flash drive shaped like a credit card. The flash drive includes our documents preloaded onto it so the student has easy access.
Next, we plan to develop more on-campus workshops. We want to work with the RAs and the alumni office to reach students in the residence halls and recent alumni. There are also plans to reach the parents. The biggest tip I can offer is to make this a campuswide effort. We want to make sure everyone knows what resources are available and where to direct students who need help. We partnered with our student life department, who were happy to include a financial health presentation in their back-to-school welcome week.
You may find other departments are just as excited as the financial aid department is to spread the word about being fiscally responsible.
To watch this web seminar in its entirety, please go to http://www.universitybusiness.com/ws111312.