I know many of you have just expended a great deal of effort ensuring that exit interviews took place on your campuses this spring. But if you suspect that exit interviews alone might not be the most effective avenue to default prevention, you may be right. Research presented at a Department of Education conference in 2004 appears to have confirmed this idea. The study, which involved Pennsylvania State University students in 4 control groups, found no statistically significant decrease in loan defaults among students who received entrance and exit counseling.
Many question whether busy financial aid professionals should be mandated by law to put such a significant amount of energy into providing exit interviews instead of having a choice of default prevention activities. A 2007 ASA study—a survey of financial aid officers attending last year’s annual conference of the National Association of Student Financial Aid Administrators and the ASA Annual Symposium—found that financial aid professionals are eager to provide financial literacy training to students, but largely lack the time and resources to do so:
– More than 90% of respondents said they spent less than 25% of their resources on default prevention activities
– 85% said that financial literacy training is not included as part of their school’s official curriculum
– 86% were willing to work with an outside organization to offer default prevention activities to their students
– 62% said they would like an industry expert to present the financial literacy curriculum to their students
In general, surveyed financial aid officers supported debt management programs that were more robust than the current entrance/exit interview. Some of the suggested improvements included more advanced information on budgeting, credit ratings, and credit cards; regular notifications to in-school borrowers about their total indebtedness; strategies for avoiding identify theft; advice on buying a first home; and tips on affording graduate studies. Services that financial aid officers cited as potentially valuable to their students included live Web chats and phone hotlines to increase students’ access to financial information, e-mail reminders before repayment begins, and regular guidance given through phone, e-mail, and print mail throughout the repayment period.
As we continue to work through what may be a prolonged period of financial difficulty and uncertainty, it will be more vital than ever for the financial aid community to put our resources into the most successful default prevention techniques available. Since exit interviews, by themselves, may not be the best option, it’s time to broaden our options. As we explore new avenues for effectively engaging borrowers to help them understand and manage their debt, we’d love to hear from you on what you have found to work in connecting with your student borrowers.
Posted by Mike Ryan on June 09, 2008 at 12:52 PM EST
It is encouraging to see an organization take efforts to ensure that future students/graduates are more informed with the hot issues of money management, credit and default prevention.
I clearly remember my exit interview being nothing more than a lady telling me that I had to pay my loan back. There was no talk about credit, default or anything of that subject.
Do you think the reform your staff is suggesting would be widely accepted within the industry? Are there resources available within and outside of your organization that could provide money management and counseling services?
Posted by TuitionU on June 27, 2008 at 06:15 PM EST
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Michael T. Ryan is Vice President of Borrower Services for American Student Assistance, a position he has held since joining ASA in February, 2003. Mr. Ryan heads ASA’s Borrower Services Division, which is responsible for all aspects of the management and delivery of service to borrowers in ASA’s education loan portfolio, including all default prevention and recovery efforts.
In his 20-plus year career in higher education financing, Mr. Ryan has held key management positions at the Massachusetts Educational Financing Authority (MEFA), and Key Education Resources (formerly Knight Tuition Payment Plans). As MEFA’s Associate Director for Programs and Operations, Mr. Ryan facilitated MEFA’s entry as a Federal Family Education Loan Program (FFELP) provider. He also played an instrumental role in the introduction of the U. Fund, (MEFA’s Section 529 College Investing Plan), managed MEFA’s U. Plan (Prepaid Tuition Program), and was responsible for the operation of MEFA’s loan programs.
While at Knight and Key, Mr. Ryan held progressively responsible management positions, from Account Manager to Senior Vice President.
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