Agenda 1. The Knowledge Gap What do students know (or not know) - - PowerPoint PPT Presentation

Agenda

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• 1. The Knowledge Gap

What do students know (or not know) about finances and borrowing?

• 2. Financial Literacy and Decision Making

What do students need to know?

• 3. Resources and Best Practices

What is Financial Literacy?

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“The ability to use knowledge and skills to manage financial resources effectively for a lifetime

• f financial well being.”

2008 Annual Report, President’s Advisory Council on Financial Capability

The Knowledge Gap

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• 1. Where do students get their information about personal

finances, borrowing and repayment?

• 2. Do student borrowers understand their loan repayment
• ptions?
• 3. Once they complete or leave school, what do they wish

they had done differently?

• 4. What are the characteristics of students who need this

information the most?

• 5. What about the students who do not borrow, what

information is for them?

Sources of Info

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Students get most of their information on financial aid from their school’s financial aid office

Top 5 Ways Financial Information was Received % Talking with financial aid counselors at your college or university 78% Other online resources from your school’s office of financial aid 65% Printed materials from your school’s office of financial aid 63% Talking with friends or family about financial aid 59% Talking with other staff or faculty at your school 52%

SOURCE: FSA survey of borrowers in school, 2014.

Sources of Info

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Borrowers in their grace period get most

• f their information on repayment options

from their loan servicer and FSA websites

Top 5 Sources of Info on Repayment Options % Online loan servicer account management 43% Studentloans.gov website 27% NSLDS website 19% Phone number for loan servicer 17% Studentaid.gov website 17%

SOURCE: FSA survey of borrowers in grace, 2013.

Sources of Info

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• Borrowers in school give high ratings for entrance

and exit counseling, finding it to be helpful, convenient, and clear

• However, only half of those in grace report that

they received exit counseling

SOURCES: FSA survey of borrowers in school (2014) and in grace (2013).

Rep epayment

34% of borrowers in their grace period report not

being aware of their repayment options

28% are undecided about what action they will

take on their loans at the end of their grace period

33% of those planning to go into repayment at the

end of their grace period either don’t know or are undecided about their repayment plan

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SOURCE: FSA survey of borrowers in grace, 2013.

Repayment

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SOURCE: FSA survey of borrowers in grace, 2013.

Have you considered Income-Based Repayment or Pay as You Earn?

15% 58% 12% 16% 0% 20% 40% 60% 80% 100% Yes, considered, but chose another plan No, not enough information No, not interested No, I do not qualify

The Knowledge Gap: Decisions

What information do you feel you still need to help you make a decision about the right payment plan for you?

• I don't know any of the other option plans other than the standard

repayment option

• I did not even know there were any options. I just figured the bill would

come and I would need to pay what it says

• I really need to take some time and look at all the options but I feel a bit
• verwhelmed every time I do
• A customized breakdown of my student loans other than examples

presented

• I wish there was a calculator of some sort so that I could put in my

information without having to go through the actual process of choosing an option

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SOURCE: FSA survey of borrowers in grace, 2013.

Actions

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34% Take same actions 40% Make a change 26% Don´t know/ not sure

SOURCE: FSA survey of borrowers in grace, 2013.

If you could go through the process of taking out loans to pay for your education all over again, would you take the same actions or make a change?

Actions

When you first enrolled in school, you may have had an idea of how much you expected to borrow in student loans. Now that you are finished, did you end up borrowing more or less than you initially anticipated?

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47% More 8% Less 22% About what I expected 17% Not sure yet, continuing education 7% Don’t know/ not sure

SOURCE: FSA survey of borrowers in grace, 2013.

If I could do it all over again…

• I would have started at a lower cost school and paid tuition out-of-pocket
• Found other resources and researched how much education would cost
• Take more classes per semester to cut down on cost
• I would have borrowed just enough and not the maximum amount
• I would have taken all subsidized loans and no unsubsidized ones
• I would borrow less, have a better understanding of loan repayment
• ptions, and not accept refund checks to make my loan smaller
• Rethink how to spend my loan
• I would begin paying my loans during my studies
• I would pay interest as I went
• Pay some early on loans
• Find out, as I go, exactly how much I am borrowing
• Get a loan counselor

SOURCE: FSA survey of borrowers in grace, 2013.

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Summary

• Students often borrow more than they expected
• Many are not aware of the options for loan repayment other

than the standard 10-year repayment plan

• Many do not have enough information about income-driven

repayment plan

• Without enough information, it is hard for them to make an

informed decision about repayment

• Customized tools exist to help them understand their options,

such as the Repayment Estimator and FACT

• Many borrowers access the tools, but not all are aware of them
• FAAs have a window of opportunity while students are in

school to ensure students have the info they need

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Students Most at Risk of Default

• Non-completers
• First-generation
• Non-traditional - age 25 or older
• Has dependents
• Not academically prepared – low high school

GPA and/or low standardized test scores

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How to Help

• Timing matters: Information is needed at the point where

decisions are made

• Make it simple: Don’t overload with information. Focus on the

basics

• Information should be both push (sent out) and pull (available

upon request)

• FSA resources are available: The Repayment Estimator, the

Financial Aid Awareness Counseling Tool, publications, videos, infographics, social media, and more

• Make this a part of school culture: Point out resources

available

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Personal Finance State Requirements

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states require a course in

personal finance to be offered Five MORE than 2011

states require a high school

course in economics to be offered One LESS state than 2011, still less than half the country

SOURCE: Council for Economic Education, 2014 Survey of the States, http://www.councilforeconed.org/news-information/survey-of-the-states/

Basics for Student Loan Borrowers

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 Budgeting  Borrowing  Repayment Strategies

Basics for Borrowers

• Only borrow what is needed
• Free money first
• Federal loans vs. private loans
• Keep track of what is being

borrowed

• Know what is owed prior to

entering repayment

• Pay interest while in school

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Financial Awareness Counseling Tool

The Financial Awareness Counseling Tool (FACT) is on Studentloans.gov

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Financial Awareness Counseling Tool

Expenses Funds

The Financial Awareness Counseling Tool (FACT) is on Studentloans.gov

How Schools Are Using FACT

Incorporating FACT into the financial aid process

• Encourage completion of FACT before disbursement of any

loan

• Direct students to FACT after completing promissory note

Utilizing FACT as a resource

• Include as part of annual loan counseling on default aversion
• Incorporate into student success courses
• Direct link on financial aid office home page

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Repayment Strategies

Basic fundamentals of a loan

• Loan fees
• Interest rates
• Capitalized interest
• Daily interest formula

Rights and responsibilities

• Benefits of a federal loan

Loan servicer

• Know who to contact and how

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Repayment Estimator

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StudentAid.gov /repayment-estimator

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StudentAid.gov

My Federal Student Aid

NEW

FSA Publications

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StudentAid.gov/ Resources

Videos

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Financial Aid Toolkit

www.financialaidtoolkit.ed.gov

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Financial Aid Toolkit: Financial Literacy

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Search for Financial Literacy Resources

Campus Based - All Campus Based - Targeted

• Presentation to freshmen & transfers
• Program for students & alumni for career

exposure & loan management

• 1 credit course on financial education
• Financial Wellness part of Office of

Student Services, Student Health

• Money Management Fairs with prizes
• Create an outreach program with

Student Life

• Financial Literacy for students with SAP

issues

• Students and teachers provide free tax

assistance and financial literacy information

• Deliver to athletic teams and housing

students Delivery Methods Third Party Resources

• Peer counselors trained for personal

finance counseling/coaching

• Financial Aid office provides session in

College Success class

• Near to Peer counselors deliver to

secondary students

• One-on-one counseling/coaching
• Loan Servicers
• Non-Profit Organizations
• State and Regional Associations
• Mymoney.gov
• Departments at school

Successful Outreach

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Share Your Best Practices

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QUESTIONS & COMMENTS

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