The Board of Governors of the Federal Reserve System (Fed) hosted a conference in Washington, D.C., on November 28 and 29 to examine the risks associated with borrowing student loans to pursue post-secondary education. Clint Young (CS), NOVA’s financial literacy, default prevention work-study coordinator, participated on the Financial Aid Counseling panel along with other financial aid professionals from the Georgetown University Law Center, Virginia Commonwealth University and the Texas Guaranteed Student Loan Corporation.
The panel, which was moderated by Charlotte Etier of the National Association of Financial Aid Administrators (NASFAA), responded to the Fed’s recently published report that focuses on the challenges of student loan counseling. The panelists discussed the counseling strategies employed at their respective institutions, impediments to effective loan counseling, and they provided recommendations to improve the outcomes that borrowers experience.
One of the key themes that emerged during the discussion was the need for legislators to provide financial aid administrators with the flexibility to intervene when they see a need. For example, Young mentioned that sometimes students take courses on a part-time basis, but borrow the maximum amount of Stafford loans and this may cause students to exhaust their federal loan eligibility before they complete a degree. However, federal policies prohibit financial aid administrators from reducing the amount students may borrow in such situations. Current policies only allow administrators to deny loans on a very limited case-by-case basis and prohibit administrators from requiring any additional loan counseling beyond an entrance and exit counseling session that is typically completed at www.studentloans.gov in 20 to 30 minutes.
During the panel, there were calls to simplify the number of repayment plans, encourage borrowers to enroll in auto-debit for loan repayment since it reduces the likelihood of default, and provide administrators with the discretion to require additional loan counseling. Young also highlighted the 2015 National Report Card on State Efforts to Improve Financial Literacy in High Schools and emphasized the need for more robust financial education in high school in order to prepare young adults to make important financial decisions that will affect them well into the future.
Communications and Enrollment Support Associate Director Billy Ray Davis (CS) and Pell Grants and Loans Assistant Director Faith Owens (CS) from NOVA’s Financial Aid Office also attended the conference and participated in the discussions.