As concerns grow about rising student debt, more schools are stepping in by trying to help students get their act together.
The hope is that by providing students with detailed information and guidance about their finances, it will help them manage their money while in school and after they graduate.
“We focus on laying out the options that they have and then answering the questions they have about them so that they can make an informed decision based on who they are” rather than rely on impersonal formulas, says
director of financial literacy at Indiana University.
Cutting down borrowing
One purpose of these information campaigns is to encourage students to borrow less when possible.
Indiana University has been a pioneer in this regard. Beginning in 2012, the school started sending students a letter every spring with information about their student loans, including how much they should expect to pay monthly after they graduate. Since implementing the program, the school has seen a reduction of about 17% in total student borrowing, Mr. Schuman says. The letters also have encouraged more students to get in touch with the financial-aid office.
Mr. Schuman says the goal of the program isn’t to “parent” students or tell them how to approach their borrowing, but instead to provide them with the data necessary to make an informed decision. “Just giving them the current situation and having them understand this is what it looks like after you graduate can cause them to be both reactive and proactive going forward,” he says.
This month, the university also began providing students with guidance on their spending habits, through an online calculator that walks them through many of the possible financial decision-making points of a year at college—including whether to bring a car on campus or what dorm to live in.
Other schools have embraced the debt-letter idea, and some state lawmakers have started requiring schools in their states to send them. The University of Minnesota sends students a debt letter and has looked for other ways to encourage students to borrow less.
For instance, each year it spells out for students what they need to do to complete their degree on time and whether they’re ahead, behind or on track in achieving that goal, so that they don’t run up additional debt and other costs by extending their stay at school.
The university tries to make clear the real-world implications of taking a year less to finish college with materials that show what students could do—such as take a vacation, buy a car or put a down payment on a home—with the savings, says
director of the school’s One Stop Student Services.
The school also publicizes data on its students’ average debt at graduation, which has been decreasing, as a way to indicate to students that they may not need to borrow as much as they think, Dr. Selander says.
Some colleges have intervened more directly in students’ finances. For instance, the University of Missouri announced earlier this year that it would prohibit students from using their campus IDs, which function as a credit card in certain stores, on expenses that aren’t related to education.
The idea came after school officials realized that financial difficulties were one of the major reasons students were struggling to complete school, says
the university’s vice provost for undergraduate studies. In response, the college began to audit individual student accounts at the school and found that for 40% of past-due bills from university-owned stores or services were for nonacademic expenses. Those included things like a videogame console and makeup, Dr. Spain says.
“We were actually allowing students to develop habits that were really poor financial management, habits that were then having a negative effect on their financial ability to stay enrolled” in the school, he says.
The program is still in its beginning stages, and Dr. Spain acknowledges that cutting off a line of credit could put students at risk of struggling to pay for basic needs like food while they’re in school.
He says the school has convened a working group including student and university representatives to make sure students have a safety net in case of emergency.
“We don’t want to place students at risk who are experiencing either a chronic or acute financial crisis,” he says.
It’s these possible outcomes that worry
a professor at Temple University who studies college students’ financial challenges. Her research indicates that often low-income and moderate-income students struggle to find enough aid to pay for food and housing, leading to high levels of homelessness and food insecurity at colleges.
Given that backdrop, colleges should be working to provide students with more resources, not necessarily encouraging them to use as little loan money as possible, she says.
“The reason that you’re never going to see big effects from all of this is that people’s information about this stuff really isn’t the big problem,” she says. “It really worries me that we’re counseling people into taking less money than they might actually need.”
Offering an incentive
At Ohio State University, officials are taking a different approach, using a financial incentive to push students to get more educated about their finances.
The university last year launched a partnership between the bursar’s office, which handles students’ bills, and the school’s Student Wellness Center to offer counseling to students who might be struggling to pay their bills on time.
Previously in College Financing
- Tuition Aid for a Piece of Your Future (September 2017)
- Mistakes to Avoid With CSS Profile (September 2017)
- Help for Homebuyers Burdened by Student Debt (June 2017)
- The High Price of Not Complete College in Four years (June 2017)
- Does It Pay to Double Major? (February 2017)
The program began as a pilot focusing on students paying their bills in installments. Officials sent students who were late making a payment an email inviting them to have their $25 late fee waived in exchange for attending a one-hour financial coaching session.
This fall, officials expanded the program to include students who pay in lump sums rather than installments. They can waive a $100 fee assessed on late payments if they complete two hours of financial counseling.
“We’re not in the business of assessing late fees, we’re in the business of educating students, and we want this to be part of the education,” says
the bursar at Ohio State. “We can see this repetitive habit of students getting assessed these [late fees], and it’s really trying to figure out ways that we can help them get out of that cycle.”
Students may be struggling to make payments on time for a variety of reasons, according to
assistant director for financial wellness at the school’s Student Wellness Center.
It could be that they’re not regularly checking email, they’re wrapped up in a school or personal issue, they just forget or they’re genuinely struggling.
The financial counseling students receive through the program varies, Mr. Hoynacke says.
Students start out talking with their peer counselor about their budget and life goals and then work from there to discuss other issues like student loans, credit scores, budgeting, savings and retirement.
“It really is a very personal meeting,” Mr. Hoynacke says.
Ms. Berman is a reporter for MarketWatch. Email: firstname.lastname@example.org