Many students who took out large amount of federal student loans did not receive the required in-person or online counseling, according to a report released this weekby Young Invincibles, conducted with NERA Economic Consulting.
“A full 40 percent of participants with federal loans said that they did not remember receiving counseling even though the federal government requires it,” Chris Altieri wrote on the YI blog. “That means colleges aren’t doing their part to make sure students understand their loans.”
The report includes a survey of 13,000 participants deep in debt, with an average student-loan debt of $75,000. About 42 percent of survey respondents were either currently enrolled in an undergraduate program or had finished one in the past five years. The other 58 percent were pursuing or recently earned a graduate or masters degree.
“It’s pretty clear that colleges need to do more when such a high percentage of students report never receiving counseling,” Rory O’Sullivan, co-author of the report and policy director at YI, told Bloomberg. “Some counseling is of such low quality that students don’t consider it help.”
Before a federal loan is disbursed, students must go through entrance counseling required by the federal government, Bloomberg notes. Student borrowers must also go through exit counseling before they withdraw, graduate or drop below half-time attendance.
Many of the students in the survey described the FAFSA, which is often required for anyone wishing to take out student loans or apply for Pell Grants or scholarships, as “confusing,” “long” and “complicated.”
More than 90 percent said they want all colleges to send a standardized letter “where schools must explain their offers in ‘plain English’ using the same terms and format.”
Young Invincibles concluded on a few recommendations: Strengthen counseling requirements for colleges to help borrowers understand their loans, more involvement from high school counselors, and simplify the FAFSA and financial aid award letters.
One of them is the Know Before You Owe Act, which would require schools to counsel students before they take out a private loan and inform them if they have any untapped federal loan eligibility.
Another bill, the Understanding the True Cost of College Act, would require disclosure by higher education institutions and lenders that federal student loans offer generally more favorable terms and repayment options than private loans. It would also require the Education Department to detail interest rates, fees and expected monthly repayment amounts for federal loans.