While student loan counseling is required before taking out a loan or leaving college, there are no government requirements for institutions to provide ongoing counseling to students while in school.
Experts say there’s a link between counseling, which helps improve students’ financial literacy, and how well student loan borrowers to later — such as whether they complete school or avoid defaulting on their loans.
Roughly 1 in 6 borrowers — 3.6 million — were in default on $56 billion in student debt, according to data released by the Department of Education. Borrowers in default haven’t made a payment for at least a year.
Most borrowers who have defaulted owe relatively small amounts in loans — typically around $8,900, according to a department study released last year. Student loan experts say these borrowers are usually those who have dropped out of college.
States where student loan borrowers default at the highest rates for their four-year colleges tend to be near the bottom in completion rates, officials say.
[Learn what you need to know about FAFSA changes.]
In response, the Department of Education is introducing an experiment to identify best practices for student loan counseling to provide tools that go beyond one-time entrance and one-time exit counseling. The test is also aimed at college completion — especially at the community college level.
“For the past two years, we’ve been hearing from institutions as well as organizations that help student borrowers that students are making decisions about borrowing without a whole lot of information,” Under Secretary of Education Ted Mitchell told U.S. News in a December interview. The experiment, a three-year study, will be conducted at 51 participating institutions across the county, starting July 1 — the beginning of the 2017-2018 year for financial aid.
A student who takes out a federal loan for the fall 2017 semester at a participating institution might be a part of the loan experiment. A total of 100,000 students from these schools will participate in the study.
Students in the test group will receive ongoing counseling to gain a better understanding of their finances and ability to manage their loans, the department says.
Of the 51 schools participating in the study, 35 are community colleges; 14 are public, four-year state schools.
There’s a heavy emphasis on community colleges, Mitchell says, since there’s been demand from these schools for better tools.
[Read how grads’ earnings can contribute to community college decisions.]
“Community colleges have been the most consistent voice saying they need more ability to help their student about borrowing,” he says.
In the test, only one private, nonprofit university is participating: New York University.
Andrew Josuweit, CEO of StudentLoanHero, an online platform that helps borrowers pay off student loans, says: “With private schools, they’re probably pouring more money into career counseling and the career office to get jobs; and they’re probably pouring a lot more money in their financial aid offices to do this type of counseling already.”
Graduates from private nonprofit institutions also tend to have lower default rates, the StudentLoanHero CEO says.
But government officials say four-year institutions can benefit from the study, since their students face many of the same borrowing challenges.
“Like many institutions, IPFW is concerned about our students’ growing reliance on student loans,” said David Peterson, director of financial aid at Indiana University-Purdue University–Fort Wayne, in an email. Our plan is to work closely with ED to develop an expanded loan counseling program that provides a stronger counseling, loan education and debt management component.”
The experimental loan counseling initiative at IPFW begins in fall 2017.
“Every institution — especially today — as states disinvest from education, is faced with the need of helping their students to be better borrowers,” says Mitchell.
The undersecretary says results from the study could be used by Congress to implement a set of tools for all institutions participating in the federal student loan program.
Listed below are the 51 schools participating in the department’s study.
| School name | State | Type of institution |
| Arkansas State University–Newport | AR | Two-year public institution |
| Arizona State University–Temple | AZ | Four-year public institution |
| Canada College | CA | Two-year public institution |
| College of San Mateo | CA | Two-year public institution |
| Copper Mountain Community College | CA | Two-year public institution |
| Los Angeles Pierce College | CA | Two-year public institution |
| Riverside City College | CA | Two-year public institution |
| San Diego City College | CA | Two-year public institution |
| San Diego Mesa College | CA | Two-year public institution |
| Skyline College | CA | Two-year public institution |
| Southwestern College | CA | Two-year public institution |
| Metropolitan State University of Denver | CO | Four-year public institution |
| University of Delaware | DE | Four-year public institution |
| College of Central Florida | FL | Four-year public institution |
| Tallahassee Community College | FL | Two-year public institution |
| Indiana University-Purdue University–Fort Wayne | NY | Two-year public institution |
| Big Sandy Community and Technical College | KY | Two-year public institution |
| Elizabeth Community and Technical College | KY | Two-year public institution |
| Gateway Community and Technical College | KY | Two-year public institution |
| Hopkinsville Community College | KY | Two-year public institution |
| Jefferson Community and Technical College | KY | Two-year public institution |
| Madisonville Community College | KY | Two-year public institution |
| Somerset Community College | KY | Two-year public institution |
| Southcentral Kentucky Community and Technical College | KY | Two-year public institution |
| Southeast Kentucky Community and Technical College | KY | Two-year public institution |
| Northern Essex Community College | MA | Two-year public institution |
| Central Maine Community College | ME | Two-year public institution |
| Glen Oaks Community College | MI | Two-year public institution |
| Lansing Community College | MI | Two-year public institution |
| Washtenaw Community College | MI | Two-year public institution |
| Missouri Southern State University | MO | Four-year public institution |
| Flathead Valley Community College | MT | Two-year public institution |
| Guilford Technical Community College | NC | Two-year public institution |
| Bergen County Community College | NJ | Two-year public institution |
| College of Southern Nevada | NV | Two-year public institution |
| Nevada State College | NV | Four-year public institution |
| Truckee Meadows Community College | NV | Two-year public institution |
| Monroe College | NY | Proprietary institution |
| Monroe Community College | NY | Two-year public institution |
| New York University | NY | Four-year private institution |
| SUNY College of Agriculture and Technology–Cobleskill | NY | Four-year public institution |
| Central State University | OH | Four-year public institution |
| Lorain County Community College | OH | Two-year public institution |
| University of Central Oklahoma | OK | Four-year public institution |
| Reading Area Community College | PA | Two-year public institution |
| University of Pittsburgh | PA | Four-year public institution |
| Texas A&M International University | TX | Four-year public institution |
| Texas A&M University | TX | Four-year public institution |
| Salt Lake Community College | UT | Two-year public institution |
| Nicolet Area Technical College | WI | Two-year public institution |
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New Loan Counseling Tools at Some Schools originally appeared on usnews.com
