The government requires colleges and universities to counsel students on student loan debt, but clearly the message isn’t always getting through. In a 2012 report by NERA Economic Consulting and Young Invincibles, a youth advocacy group, 13,000 college students who carried $75,000 or more in student loans — placing them in the top 5% of student debtors in the U.S. — were asked whether they remembered receiving counseling. More than 40% said no.
Meanwhile, college costs are rising and students are borrowing more debt each year. By the time they graduate, the average college degree-holder is hauling a $30,000 loan balance behind them and one out of of every 10 students were behind on their payments at the end of 2014, double the rate just 10 years ago.
While it’s not entirely the responsibility of educational institutions to teach a bunch of 18-year-olds about the realities of debt, some universities and colleges are going the extra mile anyway. We wanted to highlight a few schools taking steps to help students manage — and ultimately lessen — the amount of debt they’re saddled with.
In an effort to get students to minimize the amount of debt they take on, Indiana University has been serving an annual wake-up call in the form of debt letters. Each fall, students get a debt letter email, which lists how much federal student loan debt they’ve racked up so far and how much their future monthly payments will be. (For their private loans, students are on their own.)
IU began sending out these notes in 2012, and in that year alone the school says it saw a 12.4% decrease in student borrowing across its seven campuses.
“I think oftentimes students take out money not knowing what the actual ramifications are,” says Phil Schuman, director of IU’s Office of Financial Literacy. “We wanted to make the borrowing situation a little bit more transparent for them.”
In addition to annual debt letters, the university offers three different one-credit personal finance education courses as an elective and a 60-minute online personal finance review. Neary 1,000 students have signed up since the classes began in 2013.
To encourage more students to finish their degrees on time (the longer you stay in school, the more money you spend), IU also offers a 25% tuition discount for courses taken over the summer. At its main campus in Bloomington, Ill., IU increased the number of classes students could take and still pay the flat tuition rate from 17 credit hours to 18.
Western Governors University
Online nonprofit Western Governors University adopted a similar strategy to help students understand exactly how much debt they were signing up for. But rather than simply sending students a letter with their total debt balance, WGU takes the guesswork out of calculating financial need. Students are given suggested loan amounts they’ll need to cover their expenses, which is generally the cost of tuition and fees, less any grants or scholarships they’ve received. Students still have the option of maxing out their federal loans for the year, but a WGU spokesperson says that in 2013, 75% wound up taking the lower recommended amount. Since the launch of WGU’s Responsible Borrowing Initiative in 2013, average borrowing per student (of those who take out loans) has decreased by $2,500 per year, a reduction of 29%. In one year, WGU students reduced borrowing by $125 million, even as the university’s enrollment grew by 18% during the same period.
WGU takes its cost-saving measures a step further: It hasn’t raised tuition rates since 2008. It’s not exactly fair to compare WGU to traditional four-year universities, which have much higher overhead costs than online institutions. But just for kicks, tuition rates at four-year public institutions rose by nearly 22% over the same time period.
Northwestern University’s School of Law is using a different approach to ease the debt burden for new graduates. Last month the school announced a new program offering students who either haven’t found a job after graduation or are earning less than $85,000 a year in the private sector, one year of student loan interest forgiveness.
A spokesperson for the school told CBS an estimated 20% of this year’s graduating class will be eligible. A three-year law degree can cost as much as $231,000, not counting any scholarships or financial aid.
New Hampshire public universities
It’s hard to argue with experts who reason that tuition would not be rising at such rapid rates if states hadn’t cut funding for higher education in the past decade-plus. State funding for all public colleges decreased by 12% overall, while median tuition rose 55% across all public colleges between 2003 and 2012.
So far, tuition has not decreased in a single state since the recession, but it is promising to see lawmakers in at least one state do something to get matters under control.
New Hampshire has the highest average in-state tuition rates in the country, but students got a short reprieve in 2013, when state lawmakers funneled an additional $15 million into the school system, enabling what would become a two-year tuition freeze at public institutions. The freeze will last through this year. Unfortunately, efforts by education leaders to extend the freeze for another two years fell short this year.
The University of Illinois
Sometime around the recession, the University of Illinois realized it had a problem: increasingly, students were dropping out, citing financial concerns. So the school created an initiative called the
Student Money Management Center (SMC) to work with students who were feeling financially squeezed.
The school recognized that some students were struggling to stretch out their loan disbursements over the course of a semester, so they would apply for emergency loans. This happened even when students received loan refunds at the beginning of the semester (this happens when a loan exceeds the amount of tuition/fees owed to the school). To help, the SMC started reaching out directly to students who received refunds of more than $200, offering information about what the refund is — not a refund at all, really, because it’s still part of their original loan and will eventually have to be repaid — and how to save it as part of their larger budget. The university doesn’t yet have data on how effective these programs have been since they’re still relatively new.
In November 2010, the center launched the iBudget Financial Literacy program, meant to help students who have fallen behind on tuition payments. When tuition isn’t paid, a student’s school schedule is typically frozen. But if they complete the iBudget program, which includes a 30-minute video and a tool that lets them create a personalized monthly budget, and they agree to a payment plan with the university to catch up on missed payments, they can have their schedules unfrozen.
Since the program’s inception, the rate of students who failed to sign up for past-due payment plans and would have eventually been kicked out of school fell by 14%.