Given my recent NASFAA student aid perspectives piece, “Borrowing Blind: Can Loan Letters Help to Contain Student Debt?,” it’s fair to say I’m a fan of loan letters and their potential to help educate students both before, after, and during the borrowing process. So, naturally, my interest was recently piqued by “Financial Aid Officers Oppose New Requirements to Help Students Manage Loans,” written by Dan Menefee and published by MarylandReporter.com.
HB509 and HB262 Goals
Menefee’s piece centers around two Maryland bills: HB509 and HB262. Both bills would require higher education institutions that receive state funding to send certain annual notices to students about their education loans. In summary:
HB509 would require institutions to provide each student with an estimate of:
- The total amount of education loans used, both federal and private
- The total payoff amount or a range of the total payoff amount
- Monthly payments for a similarly situated borrower
- The percentage of the loan borrowing limit used
For students who have declared a major of study, HB262 would require institutions to additionally provide:
- The student’s major
- The expected starting salary range in the student’s field of study
- The expected net monthly salary for a job in the field of study as compared to the estimated monthly repayment amount
Arguments Against HB509 and HB262 Efforts
The arguments against these bills can be summed up in three statements: Students already get this information, someone else should do it, and it’s too much work and too expensive. Here’s why I think each of these arguments is a cop-out.
1. Students already get this information.
Yes, yes they do. It’s true that students can access the National Student Loan Data System(NSLDS) to find information about Federal Loans and Grants. The NSLDS data that students have access to includes the amounts, outstanding balances, loan statuses, and disbursements. Students also participate in entrance and exit counseling about their debt.
But what we are doing currently is, sadly, not enough. In 2014, the Brown Center on Education Policy at Brookings study “Are College Students Borrowing Blindly?” found that 28% of federal loan borrowers believed that they had no federal loans. Fourteen percent said they didn’t have any student debt. Half of first-year students seriously underestimated how much they had borrowed.
If our true desire is to increase accessibility to college, while reducing borrowing, perhaps it’s time FinAid takes a lesson from our marketing counterparts. The ‘Rule of 7’—one of the oldest and most fundamental elements of marketing—is the belief that a person must hear a message at least seven times before they’ll decide to take action. Obviously, we are not trying to sell students on loans. But we want them to act; we want them to understand their loan debt and their options for repayment. For that to happen, Financial Aid professionals should always be searching for additional, better, other ways to communicate with students.
2. Someone else should do it.
Um, really, who? Who is better suited to have a potentially uncomfortable conversation with a student than a trusted member of the Financial Aid Office? One professional suggested loan servicers should have these conversations. That seems a less than trust-inducing option considering that in January the Consumer Financial Protection Bureau (CFPB) announced it was suing the nation’s largest student loan servicer, Navient. The CFPB is suing Navient “for systematically and illegally failing borrowers at every stage of repayment.”
Navient is not alone. In late 2015, the CFPB published a broad report that highlighted widespread failures in the student loan servicing industry. The report states, “As millions of student loan borrowers struggle to repay their student loans, many consumers reported to the CFPB that servicers are failing to provide the basic level of service necessary to meet borrowers’ needs.” My confidence has not been bolstered.
Instead of passing this responsibility on to others, schools should seize this opportunity to drive process in a way that is right for their students. Financial Aid Offices know their students better than anyone else—what they do and don’t respond to. HB509 and HB262 open the door to build on that relationship by expanding the information available to students through award letters, financial literacy tools, and financial planning activities.
3. It’s too much work and too expensive.
When have the best things in life ever come easy? Free maybe; but never easy. I have never known Financial Aid professionals to shy away from something that could help students make better decisions about college funding.
This type of education and advising is exactly what aid professionals want to do more of. Okay, maybe we don’t want to do more researching and preparing of loan letters. But we DO want to do more reviewing and discussing of aid to help our students make more sound financial decisions.
I remember my early days in the Financial Aid Office when I was responsible for conducting exit counseling with students—at a time before online counseling had taken off. I would look up each student’s records and provided a personal and customized exit counseling experience that contained information about federal and private loan debt and estimated repayments. The loan letters go one step further in keeping students informed of their loan debt throughout their education.
The Cost of Progress
The cost of implementing both HB509 and HB262 at the 13 public, 15 community college, and 13 private nonprofit institutions in Maryland is estimated at $1.14 million, with an additional upfront cost of $425,000. However, this implementation plan assumes new employees are necessary to manage the process and produce disclosures to students.
There are other implementation options; ones that leverage the power of people and technology. What if, instead of having Financial Aid professionals push more and more paper around, institutions implemented technology to do the heavy lifting: Finding information in the Student Information System; customizing it into language and a delivery format that has impact on tech-savvy students; and helping with follow-up via automated text alerts?
Technology Saves Costs, Empowers Staff
The student financial aid engagement platform by CampusLogic does just that—and so much more. If the CampusLogic student financial aid engagement platform was used to implement loan letters in the state of Maryland, upfront costs of $6,000 per institution and recurring annual costs averaging $17,200 per institution are estimated. Across the 41 institutions referenced in the Fiscal and Policy Note from the Department of Legislative Services, implementing CampusLogic is estimated at $246,000 up-front, and a recurring annual cost of $705,200. That’s a 42% cost savings on implementation and a 38% cost savings on annual recurring costs. If implemented, the CampusLogic platform would allow schools to process Shopping Sheets, Award Letters, and any other financial aid communications as mobile, responsive media content. Our AwardLetter product is really a student engagement engine. You can read more about it in this blog post by our COO, Chris Chumley.
These Bills Are Good for Students
As I said earlier, I’m a fan of loan letters and their potential to help educate students both before, after, and during the borrowing process. If we look at HB509 and HB262 as opportunities to improve how we’re doing things—rather than as roadblocks meant to slow things down—great things can happen.