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ASA supports effort to change the way financial aid is discussed and administered so that students and families can be proactive, empowered consumers of higher education rather than passive financial aid “recipients.”
Too often student borrowers and their families make unwise choices about college financing that they may come to regret. This includes:
The reality is that despite 50 years of existence of the current college financing system, far too few students and families know how the system can work best for them—they are just signing on the dotted line for financial aid and never questioning if it’s in their best interest to do so. Many borrowers are so focused on getting in, they fail to take a long-term view on how they will repay.
While student borrowers and their families need to be better informed about the best means of financing a college education in a way that fits their unique circumstances, more information is of little assistance if borrowers and families don’t make a tandem commitment to becoming more educated consumers. College acceptance can’t just be about getting into your “dream” school, it has to be about getting into the right school both academically and financially. Student borrowers and their families need to start making choices about higher education as they do other consumer purchases—the decision can’t just be about a name brand, it has to be a smart financial choice as well.
ASA supports efforts to increase financial education for college populations to help ensure student borrowers are educated consumers of higher education debt and properly prepared to understand the debt burdens they are taking on in a broader economic context.
Colleges have an obligation to reinforce with their in-school population the need to live like a student now so they won’t need to in the future. Students should be instructed on the simple basics of budgeting, personal finance, and the difference between wants vs. needs, so that all borrowing is kept to a minimum. Additionally, colleges need to inform students that not all student loans are created equal. A distressingly high number of private student loan borrowers are not aware that these loans have fewer payment options than federal loans, or the benefits of exhausting all federal loan options first.
Of course, supplying debt management education to students comes at a financial and resource cost, and schools need not carry this burden alone. As federal and state financial aid policies also influence debt level amounts for students, government funding could help defray this financial expense for colleges. The federal government should provide resources to assist the schools in providing these services through a grant program.
ASA supports efforts to improve entrance and exit counseling in ways that will have a meaningful impact on borrower success and won’t unnecessarily burden schools.
While federal student loan recipients do currently have financial aid counseling requirements for entrance and exit counseling, some schools feel that additional counseling beyond that is necessary for their particular constituency of students. Unfortunately, the Secretary of Education has interpreted current law in such a way that prohibits schools from requiring such additional counseling because there is a belief that it may limit access to federal loans. As schools are responsible for their own cohort default rates, they should have the ability to require additional counseling as they see appropriate. We believe that this can be done in a way that does not have an adverse impact on access.
All research shows that for financial education to be effective, it has to be relevant, timely, actionable, and ongoing. Efforts to strengthen entrance and exit counseling should be focused on ensuring that borrowers are receiving information and counseling in a time and manner that they are able to act upon. There are many proposals within Congress to change requirements around exit and entrance counseling, but none will be effective unless the timing of such counseling is also addressed.
Entrance counseling should be required at a time and in a manner that the borrower can understand the obligations and terms of their student loans prior to disbursement of the loan. Current entrance counseling is generally provided after the loan decision has been made and at the moment the student is in need of the funds the most, therefore not allowing for an educated decision about loan obligation to be made prior to taking the loan. Clearer disclosures of loan obligations should be provided prior to taking out a federal loan, with both the repayment obligations AND the flexibility of federal repayment options well defined.
There should be efforts made to ensure that exit counseling continues after graduation. Current exit counseling due-diligence efforts are generally the right information in the wrong form and at the wrong time. When a student is having an exit interview they are thinking about graduation or their job prospects. The furthest thing from their mind is the bill that they will have to pay in 6 months. Exit counseling should provide follow-up information and outreach to borrowers around the time that first payment is due so they can immediately take action on the counseling provided. If the school does not have the personnel to provide this outreach, they should be required or incented to use a third party provider to provide this follow-up.
ASA supports efforts to ensure student loan borrowers have proactive and timely information on student loan repayment, and supports efforts to ensure that neutral parties working on behalf of the borrower are providing unbiased student loan counseling beyond the exit and entrance counseling process.
Policymakers should reinstate and expand the federal investment in innovative and proactive education debt management programs that have proven to help student borrowers take advantage of all the available remedies put in place by Congress to avoid delinquency and default. America cannot regain its global competitiveness and bolster its economy without a functional student loan program that ensures student borrowers can survive the payback period without financial demise.
ASA has long advocated for both state and federal-level tax incentives to be made available to employers who adopt student loan reimbursement as part of their benefits programs.
At ASA we offer student loan reimbursement as a benefit to our employees because we believe it’s the right thing to do. It also makes good business sense as we see an increase in job satisfaction, retention of employees, and have been named to the Boston Globe’s Top Places to Work list for eight years in a row. We encourage other employers to do the same for their employees
Employers are the primary beneficiaries of a highly educated population. Thanks to a tax benefit, many employers offer tuition reimbursement that will allow employees to further their education. Unfortunately for the employer, once these credentials are gained, the employee often moves on to other opportunities. Employers would benefit, and retain employees, by helping employees pay for the loans that got them the great job in the first place. Student loan debt reduction programs provide employers and employees with a foundation for economic stability. By offering a tax incentive to employers who provide a student loan reimbursement to employees, we can help:
In an ASA survey, 76% of respondents said that, all other things being equal, if an employer offered assistance with student loan repayment, it would be the deciding factor or have considerable impact on their choice to take that job.
Since 2016, ASA has participated in the Student Debt Working Group, an initiative of the Massachusetts Attorney General and the Greater Boston Chamber of Commerce that has brought together leaders from the business community, nonprofits, and government to explore ways to reduce education debt, increase transparency in student lending, and help employees manage and repay their loans. In particular, ASA worked on the Debt Repayment subcommittee to provide resources to employers considering student loan repayment programs as an employee benefit, and to champion federal and state legislation to incentivize employers to provide tax free student loan assistance to employees.