BEST PRACTICES IN LOAN DEBT COUNSELING AND COMMUNICATING LOAN DEBT INFORMATION Marvin Smith, IUPUI Kim Bennett, Trine University John McPherson, Ball State Marvin Smith, Director of Student Financial Services, IUPUI 1
Agenda Loan Debt Letter Implementation More info at www.isfaa.org IUPUI Loan Counseling Efforts Trine University Loan Counseling Efforts Ball State Loan Counseling Efforts Mandatory Counseling Needed Through Life Of Student Loan, Execs Say "The National Association of Student Financial Aid Administrators called Tuesday for Congress to allow institutions to mandate counseling throughout the life of a student loan," Financial Advisor reports. "Currently, federal law allows for counseling to be required only at the start and finish of a loan, but the group said institutions can see which students are more likely to be in danger of default through their continuing borrowing habits and academic performance. The group also called for the counseling to begin in high schools with the help of federal grants... In another recommendation, they said students should begin receiving counseling when they fill out the Free Application for Federal Student Aid. The standard procedure to begin counseling only after they decide to enroll at an institution that has offered them a financial aid package could be too late in the game for students to discover their most affordable college financing option, the group cautioned." 2
Implemen'ng House Enrolled Act 1042-2015 Informa/on Concerning Educa/on Loans (IC 21-12-15) Background During the 2012-13 academic year, Indiana University began sending annual student loan debt lehers to all student borrowers Provided informa/on on all federal loans and private loans processed through IU Along with other financial literacy ini/a/ves, IU has reduced undergraduate student borrowing across the university by nearly 16 percent over two years Approx. $44 million in debt savings 3
Background Rep. Casey Cox (IN-85) introduced legisla/on during the 2015 Session requiring student educa/on loan informa/on be sent by any postsecondary ins7tu7on whose students receive state financial aid administered by CHE Aimed to educate and empower students as they decide how to finance their postsecondary educa/on House Enrolled Act 1042 ( HEA 1042 ) passed the 119th Indiana General Assembly Signed into law by Governor Pence in April 2015 Student Loan Data Required At the /me the informa/on is provided, An es/mate of: Total amount of educa/on loans the student has taken out Total amount the student will have to pay off, based on the amount of loans the student has taken out ** Monthly repayment amounts that a borrower in similar financial circumstances could expect to make, including principal and interest, for the amount of loans the student has taken out** **(Please note: This es7mate can be a range) The percentage of the cumula/ve federal borrowing limit a student has reached 4
Student Loan Data Required Ins/tu/ons must provide this informa/on (a) on an annual basis (b) to any student for which they receive educa'on loan informa'on Educa/on loan has the meaning set forth in IC 21-16-1-5 Defined as a direct loan or loan insured or guaranteed under a federal or state program or a program of private insurance that is: Made to assist a student in obtaining postsecondary educa/on; Made to any Indiana or non-indiana student, or to one (1) or both parents or the legal guardian of the student; or Made or owned by any lending ins/tu/on:» with an office in Indiana; or» whose affiliate has an office in Indiana; or» whose affiliate is located in a state in which an Indiana bank or an Indiana bank holding company is en/tled, under Indiana law, to acquire a bank or bank holding company Addi'onal Guidance Federal Loans Use on the Na/onal Student Loan Data System (NSLDS) to provide informa/on to students Private Loans Ins/tu/ons ought to provide any and all informa/on they currently receive The Commission does not expect an ins/tu/on to collect from private lenders any informa/on it does not already receive. 5
Addi'onal Guidance Incomplete Data If ins/tu/ons know the balance of a loan but do not know the interest rate or repayment terms, they should make reasonable es/mates to provide to students. Full Disclosure Specify whether the loan informa/on includes only federal or federal & private loan informa/on. Also note that the loan informa/on may be incomplete. When/How Should This Be Sent? The Commission urges ins/tu/ons to send the lehers in the early phases of the financial aid process For most, this means sending in mid- to latesummer. Based on the effec/ve date of the law, the first round of disclosures must be sent no later than June 30, 2016. The informa/on can be sent by email and/or postal mail 6
Other Items to Consider Ins/tu/ons do not incur any legal liability for the data or es/mates provided to students in these lehers Be as accurate as possible to provide useful informa/on to students and reduce the need for follow-up explana/ons or counseling Consider adding guidance and resources to help students contain the costs of college The Commission recommends including informa/on or web links to informa/on about degree maps, on-/me comple/on, and general financial planning strategies. 7
IUPUI Approach Entrance Loan Counseling Efforts Ongoing Loan Counseling Efforts Exit Loan Counseling Efforts Entrance Loan Counseling Efforts Let students know that don t need to accept loans until AFTER orientation Talk about loan debt at orientation and the Finish in Four concepts Introduce freshman to Financial Success Planning tools Encourage completion of individual cost and resource analysis New tool: www.balancer.iupui.edu 8
IUPUI College Budget Balancer The IUPUI College Budget Balancer is an interactive web calculator that allows a user to estimate and evaluate college costs and resource options related to college enrollment. This tool provides a running calculation between estimated expenses (on the left) and estimated financial resources (on the right). Users can use this interactive tool to "do the math" in the estimate of expenses and resources and get an idea of the need to reduce potential expenses or obtain other financial calculated. 9
Ongoing Loan Counseling Loan Debt Letter Financial Wellness Council Financial Literacy Presentations Financial Education Outreach Efforts Exit Loan Counseling Standard email referral to federal loan exit counseling site New outreach efforts Some success Some not so successful (but we tried!) Webinar recordings on website 10
3/14/16 STUDENT LOAN FORGIVENESS AND REPAYMENT: WHAT YOU NEED TO KNOW Student Loan Forgiveness and Repayment Agenda Preparing for Repayment Federal Repayment Plans Overview of the Public Service Loan Forgiveness (PSLF) Program Question and Answer Session 11
From here to repayment IUPUI updates your enrollment status. Your grace period begins. Your student loan servicer sends you details about your first payment. Your grace period ends. You make your first payment. Exit Counseling Exit counseling helps you know: Your rights and responsibilities as a student loan borrower. Your overall federal loan debt. Your interest rates and the effect of interest capitalization. Available repayment plans. More about financial planning. Exit counseling is an online process administered by the Department of Education. 12
Exit Counseling Completed at studentloans.gov. Online tool provides personalized information. Students who have borrowed Perkins, Miller, or other institutional loans will complete exit counseling through the IU Student Loan Administration at iuexit.uasexit.com. Loan Servicers nslds.ed.gov 13
Overview of Federal Loan Repayment Plans Standard Graduated Extended Income-Driven Pay As You Earn (PAYE) Revised Pay As You Earn (REPAYE) Income-Based Repayment (IBR) IBR for New Borrowers Income-Contingent Repayment (ICR) Income-Sensitive Repayment (ISR) Borrowing-Based Borrower-Based Finding Your Repayment Plan Use the Department of Education s Repayment Estimator 14
$31,000 in loans, 4.29% interest Single, $30,000 income *Nathan s Top Five Repayment Plan Selection Thoughts 5. Sooner is better. 4. The more you pay, the less you pay. 3. Cheaper isn t always better. 2. You can do this! 1. Really. You can do this. * Nathan Lohr is Assistant Director of Financial Aid at IUPUI 15
Kim Bennett, Assistant Vice President for Enrollment Management, Trine University Trine University s Efforts Began in 2011-12 Loan Volumes Increasing Enrollment on the Rise Default Rates rising 16
Trine University s Efforts Created a position in 2013-14 Financial Aid Advisor Primarily responsible for default management plan Counsels all borrowers/entrance and Exit Monitors Degree completion requirements for all borrowers Lifetime Guarantee initiative Additional Outreach Why? Our motivation-- Protect loan program integrity Teach debt management to borrowers Fewer default dollars Highlight repayment options Improve our school s default rate Save students from the consequences of default 17
Implemented plans across the stages of enrollment Prior to and during enrollment Early Identification of At Risk Students Communication across all campus Timely and accurate enrollment reporting Financial Aid sessions in classes and through workshops Dedicated default prevention and retention staff Enhanced exit counseling workshops Implemented plans across the stages of enrollment After enrollment ends Communications with all borrowers at targeted times after enrollment ends Receive custom reports from guaranty agencies about delinquent borrowers Allowing all graduate to continue to have access to their Trine emails allows a broader approach to continuing communications Annual review of default borrowers to identify characteristics 18
Trine s Letter Dear, We are excited to continue assisting you in your educational goals at Trine University. In doing this, we in the Financial Aid Office want to provide you with a personalized summary of your estimated current Federal student loan indebtedness to date (as of the date you completed your 2015-2016 FAFSA) before you take on any additional debt in the upcoming academic year. In addition to your summary, we have also included many financial planning resources to help you minimize future borrowing while you complete your degree at Trine University. Please keep in mind this is only Federal loans. Any private/alternative loans you have borrowed will be in addition to these loans with additional payments accompanying them. Estimate of Your Total Federal Loans to date: $* Interest Rates Student loan interest rates vary based on when you borrowed and the loan type. Calculations in this letter are estimated at 4.29 percent. Estimated Monthly Payment Total Federal Loans: $* Standard Repayment Term: Assumed Interest Rate: 10 years 4.29 percent* Monthly Payment: $ (Other plans may be available. Please see below.) Cumulative Payments: $ Total Interest Paid: $ Financial Planning Resources: http://www.nslds.ed.gov Central database for Federal student aid. Find all Federal loans and current servicer(s). http://www.tuition.io John McPherson, Assistant Vice President for Enrollment Services and Executive Director of Financial Aid and Scholarships, Ball State 19
Items for Discussion Net Price Calculator Orientation Required Financial Literacy Course Walk-in Advising 8:00 5:00 Iontuition Debt Letters Net Price Calculator 20
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Orientation Straight Talk about Money Financial Playbook Loan Debt Info Average borrowing at Ball State One-on-One Advising Sessions Financial Literacy Course FIN 101 - Personal Finance for Fiscal Wellness A structured collection of personal finance topics relevant to the needs of young adults: personal budgets and financial plans; services available for saving, borrowing, and insurance; and taxes. The importance of being fiscally informed in the transition from college to the workplace and planning for future financial goals are emphasized. FIN 110 - Personal Finance The fundamental principles of general business and related economic concepts are considered from the consumer s point of view. Some of the topics studied are consumer buying and the use of credit, banking, insurance, investment, budgeting, and taxation. FCS 135 Financial Literacy Development of knowledge and skills to promote financial wellness through the lifespan. Includes spending plans, credit strategies, depository institutions, consumer protection, insurance investment and retirement planning. Exploration of consumer tools to enhance financial literacy. 23
Walk-In Advising Advising 8:00-5:00 24
Loan Debt Letters Not yet sure if we can do email We will include a link to iontuition 25