What Is Education Debt Management?

With federal student loans, effective education debt management is not the same as the one-size-fits-all, due diligence default prevention requirements dictated by federal regulation. Instead, it is built on the concept that borrowers will respond to what is relevant to their lives—and that “moments of truth” naturally arise in the loan process when borrowers are more open to learning about managing student loan debt because it’s useful at that exact point in time. Rather than bombard borrowers with useful information, but at non-useful times, effective debt management presents the information these borrowers need at the right time and in the most helpful format.

Education debt management means:

  • Borrowers have access to timely and neutral advice, information, and service over the life of their loans, ensuring they are fully informed of their rights and responsibilities.
  • Issues are addressed and mediated proactively, before serious consequences arise.
  • Customized and individualized information for the borrower.
  • Advice that speaks to borrowers where they are and gives them access to all the opportunities and remedies made available to them by Congress.

Doesn’t the student loan program already have “default prevention”?

Federal regulations today do include an element of default prevention. Guarantors and lenders (or their hired servicers) are required to comply with “due diligence,” by making a specific number of attempts to contact a delinquent borrower and bring the account current. But we believe due diligence doesn’t go far enough. Traditional default prevention is only performed reactively, after a borrower falls behind on payment; it may not always have the borrower’s best long-term interests in mind; and it often does not include any broader efforts to instill financial literacy.

True “education debt management” is:

  • Proactive: We must build relationships with borrowers earlier, before payment problems occur.
  • Unbiased: We must be a neutral third party that gives borrowers all possible options, without any potential conflicts of interest.
  • Holistic: We must help borrowers to take a longer-term view of their student loan, understand how their student loan payment fits into their budget, and think about their overall financial health.

ASA research has shown that the best way to carry out education debt management is through targeted and strategic contact. Our vision of student support is based on targeting those borrowers at the highest risk for delinquency and default; engaging them through one-on-one counseling; and impacting their repayment behavior. We’ve found human contact between our advisors and borrowers to be a determining factor in preventing repayment problems before they occur and resolving problems once they arise.

Regardless of the ultimate structure of our nation’s student loan program, we believe Congress should evolve the guarantor role and align federal funding to make education debt management a basic right for every federal student loan borrower.

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