Agenda 1. The Knowledge Gap What do students know (or not know) about finances and borrowing? 2. Financial Literacy and Decision Making What do students need to know? 3. Resources and Best Practices 1
What is Financial Literacy? “ The ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well being. ” 2008 Annual Report, President ’ s Advisory Council on Financial Capability 2
The Knowledge Gap 1. Where do students get their information about personal finances, borrowing and repayment? 2. Do student borrowers understand their loan repayment options? 3. Once they complete or leave school, what do they wish they had done differently? 4. What are the characteristics of students who need this information the most? 5. What about the students who do not borrow, what information is for them? 3
Sources of Info Students get most of their information on financial aid from their school’s financial aid office Top 5 Ways Financial Information was Received % Talking with financial aid counselors at your college or university 78% Other online resources from your school’s office of financial aid 65% Printed materials from your school’s office of financial aid 63% Talking with friends or family about financial aid 59% Talking with other staff or faculty at your school 52% SOURCE: FSA survey of borrowers in school, 2014. 4
Sources of Info Borrowers in their grace period get most of their information on repayment options from their loan servicer and FSA websites Top 5 Sources of Info on Repayment Options % Online loan servicer account management 43% Studentloans.gov website 27% NSLDS website 19% Phone number for loan servicer 17% Studentaid.gov website 17% SOURCE: FSA survey of borrowers in grace, 2013. 5
Sources of Info • Borrowers in school give high ratings for entrance and exit counseling, finding it to be helpful, convenient, and clear • However, only half of those in grace report that they received exit counseling SOURCES: FSA survey of borrowers in school (2014) and in grace (2013). 6
Rep epayment 34% of borrowers in their grace period report not being aware of their repayment options 28% are undecided about what action they will take on their loans at the end of their grace period 33% of those planning to go into repayment at the end of their grace period either don’t know or are undecided about their repayment plan SOURCE: FSA survey of borrowers in grace, 2013. 7
Repayment Have you considered Income-Based Repayment or Pay as You Earn? 15% 58% 12% 16% 0% 20% 40% 60% 80% 100% Yes, considered, but chose another plan No, not enough information No, not interested No, I do not qualify SOURCE: FSA survey of borrowers in grace, 2013. 8
The Knowledge Gap: Decisions What information do you feel you still need to help you make a decision about the right payment plan for you? • I don't know any of the other option plans other than the standard repayment option • I did not even know there were any options. I just figured the bill would come and I would need to pay what it says • I really need to take some time and look at all the options but I feel a bit overwhelmed every time I do • A customized breakdown of my student loans other than examples presented • I wish there was a calculator of some sort so that I could put in my information without having to go through the actual process of choosing an option SOURCE: FSA survey of borrowers in grace, 2013. 9
Actions If you could go through the process of taking out loans to pay for your education all over again, would you take the same actions or make a change? 26% Don´t 40% know/ Make a not sure change 34% Take same actions SOURCE: FSA survey of borrowers in grace, 2013. 10
Actions When you first enrolled in school, you may have had an idea of how much you expected to borrow in student loans. Now that you are finished, did you end up borrowing more or less than you initially anticipated? 8% Less 22% About what I 47% expected More 17% Not sure yet, continuing education 7% Don’t know/ not sure SOURCE: FSA survey of borrowers in grace, 2013. 11
If I could do it all over again… • I would have started at a lower cost school and paid tuition out-of-pocket • Found other resources and researched how much education would cost • Take more classes per semester to cut down on cost • I would have borrowed just enough and not the maximum amount • I would have taken all subsidized loans and no unsubsidized ones • I would borrow less, have a better understanding of loan repayment options, and not accept refund checks to make my loan smaller • Rethink how to spend my loan • I would begin paying my loans during my studies • I would pay interest as I went • Pay some early on loans • Find out, as I go, exactly how much I am borrowing • Get a loan counselor SOURCE: FSA survey of borrowers in grace, 2013. 12
Summary • Students often borrow more than they expected • Many are not aware of the options for loan repayment other than the standard 10-year repayment plan • Many do not have enough information about income-driven repayment plan • Without enough information, it is hard for them to make an informed decision about repayment • Customized tools exist to help them understand their options, such as the Repayment Estimator and FACT • Many borrowers access the tools, but not all are aware of them • FAAs have a window of opportunity while students are in school to ensure students have the info they need 13
Students Most at Risk of Default • Non-completers • First-generation • Non-traditional - age 25 or older • Has dependents • Not academically prepared – low high school GPA and/or low standardized test scores 14
How to Help • Timing matters : Information is needed at the point where decisions are made • Make it simple : Don’t overload with information. Focus on the basics • Information should be both push (sent out) and pull (available upon request) • FSA resources are available: The Repayment Estimator, the Financial Aid Awareness Counseling Tool, publications, videos, infographics, social media, and more • Make this a part of school culture: Point out resources available 15
Personal Finance State Requirements states require a course in personal finance to be offered Five MORE than 2011 states require a high school course in economics to be offered One LESS state than 2011, still less than half the country SOURCE: Council for Economic Education, 2014 Survey of the States, http://www.councilforeconed.org/news-information/survey-of-the-states/ 16
Basics for Student Loan Borrowers Budgeting Borrowing Repayment Strategies 17
Basics for Borrowers • Only borrow what is needed • Free money first • Federal loans vs. private loans • Keep track of what is being borrowed • Know what is owed prior to entering repayment • Pay interest while in school 18
Financial Awareness Counseling Tool The Financial Awareness Counseling Tool (FACT) is on Studentloans.gov 19
Financial Awareness Counseling Tool Expenses Funds The Financial Awareness Counseling Tool (FACT) is on Studentloans.gov 20
How Schools Are Using FACT Incorporating FACT into the financial aid process • Encourage completion of FACT before disbursement of any loan • Direct students to FACT after completing promissory note Utilizing FACT as a resource • Include as part of annual loan counseling on default aversion • Incorporate into student success courses • Direct link on financial aid office home page 21
Repayment Strategies Basic fundamentals of a loan • Loan fees • Interest rates • Capitalized interest • Daily interest formula Rights and responsibilities • Benefits of a federal loan Loan servicer • Know who to contact and how 22
Repayment Estimator StudentAid.gov /repayment-estimator 23
StudentAid.gov NEW My Federal Student Aid 24
FSA Publications StudentAid.gov/ Resources 25
Videos 26
Financial Aid Toolkit www.financialaidtoolkit.ed.gov 27
Financial Aid Toolkit: Financial Literacy Search for Financial Literacy Resources 28
Successful Outreach Campus Based - All Campus Based - Targeted • Presentation to freshmen & transfers • Financial Literacy for students with SAP • Program for students & alumni for career issues exposure & loan management • Students and teachers provide free tax • 1 credit course on financial education assistance and financial literacy • Financial Wellness part of Office of information Student Services, Student Health • Deliver to athletic teams and housing • Money Management Fairs with prizes students • Create an outreach program with Student Life Delivery Methods Third Party Resources • Peer counselors trained for personal • Loan Servicers finance counseling/coaching • Non-Profit Organizations • Financial Aid office provides session in • State and Regional Associations College Success class • Mymoney.gov • Near to Peer counselors deliver to • Departments at school secondary students • One-on-one counseling/coaching 29
Share Your Best Practices 30
QUESTIONS & COMMENTS 31
Recommend
More recommend
