Outstanding Loan Counseling Can Lead to Default-Prevention Success
Connie Schmidt, a USA Funds® debt-management consultant, offers financial-aid administrators advice about how student-loan-counseling programs can enhance debt-management and default-prevention efforts.
One of the best ways to prevent defaults is to have educated borrowers — so having a comprehensive student-loan-counseling program can be a key part of your school’s debt-management and default-prevention plan.
It’s important to note that strong student-loan-counseling programs are only one component of a successful debt-management and default-prevention plan. But educating students about their rights and responsibilities as student-loan borrowers — including their repayment options — and encouraging them to keep their total indebtedness to no more than 10 percent of their expected income after graduation can help students successfully repay their education loans.
School financial-aid professionals play a vital role in making sure student-borrowers understand the student-loan process and how to communicate with their lenders and servicers.
USA Funds has a variety of tools to help schools make the most of their entrance- and exit-loan-counseling efforts. The following are some of those products and services:
USA Funds Loan Counselor
The online loan-counseling tool USA Funds Loan Counselor® presents information in a way that is easy for students to learn, understand and recall. Students can access the counseling when it is convenient for them, and schools can track students’ understanding of the concepts through the online quizzes that test their comprehension of key points.
Both components of USA Funds Loan Counselor — USA Funds Stafford Loan GuideSM for entrance counseling and USA Funds Student Loan Transition GuideSM for exit counseling — exceed requirements mandated by the federal government. They also are flexible enough for schools to add customized information such as school-specific processes.
Consider having students attend a group session in a school computer lab, using USA Funds Stafford Loan Guide or USA Funds Student Loan Transition Guide for a blend of the online and in-person approaches to loan counseling.
USA Funds Stafford Loan Guide focuses on the following information:
- Borrower rights and responsibilities.
- Crucial loan terms.
- Master Promissory Note.
- Consequences of default.
- Options for repaying student loans.
- Making interest payments while in school.
USA Funds Student Loan Transition Guide includes:
- A review of borrower rights and responsibilities and key entrance-counseling information.
- Individualized loan-indebtedness figures.
- Repayment advice and calculation estimates.
- Testimonials from students about why they made their repayment decisions.
USA Funds Life Skills
In addition to providing entrance- and exit-loan counseling tools, USA Funds can help schools work with their students so they understand how to cut expenses and live by a budget. These skills can help student-borrowers make wise decisions about how much money to borrow to finance their education. Students are more likely to successfully repay their student-loan debt if they borrow only what they need to pay for their schooling.
Many schools supplement their entrance- and exit-counseling programs by using selected USA Funds Life Skills® modules. This flexible financial-literacy program can help students learn to manage their time and money wisely while they are on campus and after graduation. The first module encourages students to get a grip on their finances and live like a student while in school. Schools can provide this budgeting information through workshops, first-year-experience courses, or simply through one-on-one counseling.
Borrower Debt Management Information Service
Another useful USA Funds tool is the Borrower Debt Management Information Service. This service provides individual data for each borrower, including the amount of money borrowed for Federal Stafford, Grad PLUS and consolidation loans, the information tracked by the National Student Loan Data System, and data about the borrower’s private loans (if serviced by USA Funds’ guarantor-servicer). The “Know What You OweSM ” information sheet also includes the name of the student-borrower’s lender or current holder of each loan, the loan period and interest rate.
Some schools use this tool each year to provide their students a running total of their overall student-loan indebtedness. Other schools wait and provide this information to graduating students or those who have left school. Either way, student-borrowers can use this information to make solid repayment decisions. It helps students to start repayment on the right foot and use their six-month grace period to plan how they are going to make their student-loan payments.
As schools evaluate their student-loan-counseling programs, it’s important to take into consideration the amount of time that is available for counseling, the systems and processes that are in place, and the online capabilities that exist.
To learn more about how USA Funds can help you create a robust student-loan-counseling program, please contact Connie Schmidt by phone at (402) 421-0972 or by e-mail. Or, contact your USA Funds debt-management consultant.