Beyond Loan Counseling: Help Your Students Become Financially Fit Borrowers

Eileen Muhlig, a USA Funds^® debt-management consultant, offers financial-aid administrators the following suggestions for helping borrowers stay on the path to successfully managing their debt.

As your students arrive for the fall semester, last-minute packaging and entrance counseling may be fading memories. But helping students manage their education-loan debt is more complex than reminding them to borrow only what they need and that they must repay their loans.

Students not only need their academic degrees to be successful, but they also need financial-literacy skills. Knowing how to build and maintain a personal spending plan, balance a checkbook and use credit cards wisely are just some of the skills that they need in addition to understanding the importance of repaying their education-loan debt in full and on time. Completing their programs of study and finding that perfect job will lead to success only if they are able to avoid the stress that financial mismanagement can cause.

Consider implementing some or all of the following strategies:

• Adopt a “life-of-the-loan” philosophy, and communicate about money management at every step along the way.
  Share appropriate information with your borrowers, starting when they fill out the Free Application for Federal Student Aid and continuing until they pay their loans in full. Include an explanation of the student-loan process, loan-repayment schedules, and repayment alternatives available if student-borrowers experience financial difficulties.
  
  Make sure they understand the importance of borrowing only what they need for their education expenses. Create an awareness of how the amount of their potential education debt compares to their expected earning potential. At www.salary.com students can determine entry-level salaries for a variety of positions in different parts of the country. If a student wants to be a social worker with a starting salary of $25,000, you don’t want that student to graduate with $60,000 in education debt.
  
  Stay in touch with your students as they enter repayment, and keep track of them until they have repaid their loans. USA Funds Debt Manager^®, a Web-based tool, helps institutions create customized communication strategies to encourage students to repay their loans in a timely manner, and includes reporting functions so you can measure your efforts to promote successful loan repayment.
• Take advantage of every opportunity to create “money-smart” students and families.
  Provide money- and credit-management information at high-school financial-aid nights, during freshman orientation, and as a component of freshmen-seminar courses. Involve the rest of the family whenever possible.
  
  Create a “money-smarts” page on your school’s Web site. The “Borrowers” section of the USA Funds Web site offers a variety of resources to help students successfully navigate the student-loan process. Among those resources are loan-repayment and consolidation calculators. A link to financial-fitness tools suggested by Mapping Your Future offers sample budgets and step-by-step instructions about how to balance a checkbook.
• Organize a speaker’s bureau whose members can give presentations at meetings and activities that students already attend.
  Most dormitory resident advisers are required to provide educational programs for their student residents. Offer to provide the RAs, and perhaps your Federal Work-Study students, with training and resources so they can confidently discuss financial-literacy issues. Campus clubs and organizations likely would welcome speakers — especially peers — to share information with their members. Invite recent graduates and alumni to talk with students about “real-world” money issues and loan repayment. Peer-to-peer efforts can be a very effective way to deliver your “financial-fitness” message.
  
  USA Funds offers a program that includes information about a wide variety of money- and time-management issues. USA Funds Life Skills^® is a flexible financial-literacy curriculum that provides training materials, workbooks and CDs for undergraduate and graduate students.
• Address campus credit-card issues.
  Work closely with your school’s administration to limit or eliminate direct student access to credit-card vendors. If credit-card companies are on your campus, require them to provide an interesting and informative credit-card-management program for students.
• Create an institution-wide program that promotes student success.
  We all know that if students stay in school and complete their programs of study, they are much more likely to repay their student-loan debt. Partner with your academic-affairs and student-services departments and other areas to create a plan that will work for your institution. Include a “first-alert” program that notifies student-advising and financial-aid staff of students who are not attending classes or are failing and in danger of dropping out. Assess student satisfaction, and take action on issues that could potentially cause students to leave campus. Encourage students to become a part of their community so they are more likely to stay enrolled and complete their degree.

If you have questions, please contact me by phone at (866) 497-8723, Ext. 2703, or by e-mail. Or, contact the USA Funds debt-management consultant for your region.