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The U.S. Department of Education has announced a bold new plan to seriously revamp the process of applying for, receiving, and repaying federal student aid. That’s good news for students past and present, but enhanced operational efficiency won’t solve all the problems that plague our nation’s financial aid system.
Streamlining and simplifying various aspects of federal student aid has long been a goal of lawmakers, student advocates and the higher education community. Congress surely didn’t mean for our financial aid system to grow into the confusing patchwork it is today, but that’s exactly what’s happened since the formal birth of federal student aid in 1965. Over the years, federal financial aid has turned into a maze of different grants, loans, and loan repayment options that can be difficult to navigate whether you’re a student, parent, or even a higher education administrator.
So plenty of college financial aid officers welcomed Education Secretary DeVos’s announcement at last month’s Federal Student Aid conference that the Education Department (ED) plans to move ahead with a number of initiatives aimed at improving the whole FSA experience, from application to repayment. First, ED plans to roll out a mobile app that will include the FAFSA (Free Application for Federal Student Aid) as soon as April of 2018. That will remove a major barrier to FAFSA completion for students with no access to a computer, and bring the process of applying for aid more in line with what consumers have come to expect in the 21st century.
Unfortunately, the mobile FAFSA won’t be a shortened version of the form, at least to start out; only Congress can officially change the number of FAFSA questions (although a simpler FAFSA will likely be included in the upcoming congressional reauthorization of the Higher Education Act). But the mobile app being developed by ED is slated to have some other additional sweet features for students at every stage of the aid cycle.
The app will reportedly eventually allow students to access information about their loans and set up payment plans in one place, regardless of which servicer (private companies hired by the government to collect loan repayment) handles their account behind the scenes. It will even let users check their credit scores each month for free, and allow parents to deposit money, or schools to issue a financial aid refund, directly onto a mobile debit card for the student’s use. The student could then use the app to better track where they spend their money–a great way to help students develop better budget habits.
The Federal Student Aid Office is calling this new initiative to modernize student aid the “Next Gen Processing and Servicing Environment,” and to inform that environment’s strategy and design, they’ve begun market research on how leading financial services companies deliver products and services to their customers. That’s commonsense, given that the size of the federal student loan portfolio makes the federal government one of the largest lenders in the country. Federal student loan borrowers are consumers after all, and they definitely deserve world-class bells and whistles.
But the folks at FSA also have to keep in mind that while federal student loans have a lot in common with other consumer finance products, they also have much that differentiates them, too–particularly when it comes to consumer protections.
In fact, one could argue it’s only natural that student loans come with substantially more protections than other finance products, given that these loans are often going to teenagers with little experience in consumer borrowing and few financial literacy skills. So while traditional credit vehicles like mortgages, credit cards, and auto loans don’t come with authorized deferment periods, for example, federal student loan borrowers enjoy full protection and can temporarily halt payment (sometimes with no interest accruing) during periods of unemployment, serious illness, economic hardship and more. And federal student loans also come with many more flexible repayment options than the average debt.
All of these perks, however, can make it very difficult for student loan borrowers to find the most advantageous repayment plan for their unique situation and financial goals. Congress will likely streamline repayment options in the next HEA reauthorization, but until then borrowers deserve a customer service experience that can guide them toward the right path and fill in the personal experience that technology lacks. Sometimes that can be accomplished with slick online tools and decision trees, but other times borrowers need to have access to a real live person.
So, at the same time that FSA is focusing on processing and technology improvements, let’s hope they’re also thinking about ways to ensure a higher quality of customer service representative transactions at federal student loan servicers. To start, they should reinstate the 2016 Department of Education memo (revoked by Secretary DeVos earlier this year) that encouraged servicers to provide accurate and actionable information, consistent communications, accountability and transparency.
Similarly, policymakers also need to remember that sometimes it’s not just difficulty accessing FAFSA or the complexity of the form that stands in students’ way as they try to access college. Our nation’s K-12 education system is rife with opportunity inequality; low-income students rarely receive the same college support and counseling that are commonplace at high schools of the well-to-do. For many of the nation’s poorest students, it’s not that they don’t know how to apply for financial aid – it’s that they’ve never even considered college as a possibility. Bringing more reliable one-to-one counseling to middle and high school students, to increase their awareness of higher education’s enduring value and all the various postsecondary options available to them, is equally as important as putting the FAFSA in students’ palms.
By all means, kudos to ED for wanting to bring its technological offerings up to speed for the modern consumer. But let’s hope they don’t forget the important role actual, real live humans can play in the college aid experience.