Build a Debt Management Plan in Three Easy Steps

Carole Ann Simpson, a USA Funds^® debt management consultant, offers her suggestions about how to build an effective debt management/default prevention plan.

It’s easier than you might think to put together a debt management/default prevention plan. Follow these three steps to get started on an effective plan for your school.

Step One. Document the services you already provide. Start with the required student loan entrance and exit counseling. These two programs are the cornerstones of any good debt management/default prevention plan. In your counseling sessions consider whether you provide additional information that encourages students to borrow no more than they need or gives them a background in financial literacy topics.

Compile a list of any other activities and consider how you reach out to students during these four time periods:

• Enrollment and application — Do you provide any services to students above and beyond required loan counseling?
• In school — Do you or any groups on campus offer any financial literacy or debt management training as a workshop or as part of a freshman success class?
• Graduation — What programs, information and resources do you provide students as they are graduating and preparing to enter repayment?
• Repayment — How do you communicate with your students and help them stay on track during repayment?

Step Two. Think about what services you wish you could provide for your students. To find out how other schools work with their students, review a brief description of debt management plans at schools that won the 2007 USA Funds Excellence in Debt Management Awards.

Add some detail about your goals to your plan, and create a time line for action. 

Keep in mind that a variety of USA Funds products can help you accomplish your debt management and default prevention goals. Among them are the following:

• USA Funds Loan Counselor^® — An online tool you can customize to automate entrance and exit counseling.
• USA Funds Life Skills^® — A flexible financial literacy education program that can help you teach students to manage their time and money wisely while they are on campus and after graduation.
• USA Funds Debt Manager^® — A tool you can use to communicate with your student loan borrowers during repayment to help prevent defaults.

Include some student surveys and other measurement tools in your plan so you can determine if the new programs and services are helping you to achieve your goals. It can take two years before you’ll see any change in your school’s cohort default rate that is directly linked to your plan.

Step Three. Work to integrate your debt management/default prevention plan into your school’s overall strategic plan for student success. Doing so can be a great way for the financial aid office to tie its efforts into overall student retention and success and demonstrate how the office directly helps students succeed.

A study by the National Center for Education Statistics showed that attrition was a strong predictor of student loan default.

• Students who dropped out of four-year colleges were 10 times more likely to default than those who graduated.
• Students who dropped out of two-year colleges were four times more likely to default on their student loans than those who completed their programs.

USA Funds’ debt management consultants can help you with each step to put together your school’s debt management/default prevention plan. We can document your current efforts and help you implement USA Funds tools that can make a difference. See tips from Steve Wood, a USA Funds national debt management consultant, on how to help ensure your debt management/default prevention plan goes beyond meeting basic regulatory requirements.

Contact me or your regional debt management consultant to start building your debt management/default prevention plan.