Thinking of supplementing the required entrance counseling for some or all of your first-time student loan borrowers, but not sure you’re adhering to recently issued federal guidance?
You can supplement the minimum requirements for entrance counseling for all student-borrowers who have not yet completed loan counseling at your school or another school. You even can customize your loan counseling information just for those groups your targeted default prevention has shown are most at risk of defaulting. But supplemental enhancements to entrance counseling information must be reasonable in amount and scope, and they must allow students to receive federal loan funds in a timely manner.
The U.S. Department of Education addressed loan counseling requirements and flexibilities in this spring’s Dear Colleague Letter GEN-15-06. The Department indicated that several activities are permissible beyond what is required by regulations — including anything from completion of a budgeting worksheet, to a review of online lessons, to attendance at a presentation.
The letter specifically cites as acceptable those activities “designed to improve financial literacy and the student’s understanding of the implications of borrowing.” Again, though, those additional activities must be reasonable in amount and scope. And they cannot “unreasonably impede a student’s ability to borrow.”
If you’re thinking of adding some financial literacy training to your required entrance counseling, try to find topics that are most relevant to your students. The following are some topics that would be a great place to start.
• Student loan management — Teach students how to make informed decisions about their borrowing and avoid over-borrowing. Have borrowers research and compare expected income with estimated monthly student loan payments. Then consider sending borrowers information about their student loan indebtedness and estimated monthly payment annually to help keep them informed of their debt load.
• Student loan repayment — Explain how students can gather information about loans and repayment plans, options available to borrowers who are having repayment trouble, and borrowers’ responsibilities for repaying federal student loans.
• Budgeting — Teach students how to determine the amount of money they really have for their budgets on a monthly basis, take them through the process of creating a budget, share money-saving strategies, and provide resources to determine projected salaries for different career choices.
It’s worth noting that financial literacy training you require as part of your entrance counseling can plant the seed for broader interest in personal finance topics.
You can choose to create additional learning opportunities for your students throughout their academic careers. In fact, you can recommend additional counseling any time after completion of mandatory entrance loan counseling. Just be careful not to make completion of additional counseling a condition for receipt of Direct Loan funds.
Supplementing your required entrance counseling can be a great way to help your students avoid the pitfalls of student loan default. So consider topics that would work best for your students and your school, determine whether you want to target certain groups in your enhanced entrance counseling, and evaluate whether your plans fall within federal guidelines.
If you need help with your default prevention planning, targeting borrowers at risk of defaulting, or financial literacy education, visit www.usafunds.org.