About the Campaign

Why Education Debt Management Should Be an Entitlement

Today, public policy makes it necessary for the majority of U.S. students to use debt to access higher education. Consequently, our nation’s young adults, many of whom are taking on debt for the first time, are not only student aid recipients, but they are also student loan consumers. We have a responsibility to proactively equip these consumers with the tools and information they need to help them successfully manage their federal loans, which ultimately saves taxpayers millions each year.

To do so, borrowers need customized, one-on-one debt management support throughout the life of their loans. Phone calls and collection letters simply are not enough anymore. Borrowers need personalized financial education and guidance to help them stay out of default. By evolving the role of the guarantor as a full-time student support service provider, we can reduce the rate of delinquency and default among borrowers.

Student loan debt is on the rise…

  • The total volume of federal student loans borrowed in the first 6 months of FY2009 increased by $7.3 billion relative to the same period in FY2008, to a total of $28.0 billion. This represents a 35% increase and exceeds the 13.6% increase assumed by the Administration in the FY2010 budget proposal.
    Source: Mark Kantrowitz, www.finaid.org.
  • The average college student now graduates owing more than $20,000.
    Source: National Association of College Admissions Counselors via US News & World Report.

Student loan default is costly—and increasing…

  • Based on a $10,000 loan at 6.8% interest, a student who defaults could end up paying over $6,000 more than a student who adheres to his or her standard repayment schedule.
    Source: ASA Internal Research.
  • According to the Student Lending Analytics Blog, “the most updated cumulative default rates suggest that 1 in 4 borrowers at for-profit institutions who graduated in 2002 have already defaulted, and almost 1 in 5 freshmen and sophomores at 4-year institutions are expected to default over the life of their loans based on recent budget projections. And that was before the economic crisis of the last 12 months.”

Debt is increasing among neediest students…

  • A study by Mark Kantrowitz showed that more Pell Grant recipients, who are the lowest-income students, graduate with student loans than non-recipients, and their cumulative debt is higher.
  • The College Board reports that, from 2004 – 2008, borrowing among community college students rose by 8%, and among students at for-profit schools, the median increase in debt jumped by 23%.
  • A University of Arizona study of first-year college students found that students who exhibited risky financial behavior (maxing out credit cards, late payments, payday loans, etc.) were 16% less likely to predict they would successfully graduate than their peers—making it more likely they would have debt but no degree and less earning potential.

Students need—and want—education debt management tools more than ever before…

  • In a recent survey of parents or guardians of college-age children who are paying for a college education with student loans…
    • 93% of respondents agreed that there is a real need for financial education for students to help them understand the importance of repaying student loans when due.
    • 92% of respondents think that information about options for repaying student loans is valuable.
    • 91% think that colleges should make on-campus debt management and financial literacy programs available to students taking out student loans.
  • However, in a survey of Financial Aid Officers…
    • 80% reported that students did not understand and are not prepared for a financial commitment like student loans.
    • Yet 75% of respondents said they had no system for debt management education in place and—
    • 50% of respondents said they had no plans to put that kind of system in place at their school.
    • 90% of these Financial Aid Officers agreed that guarantors are best positioned to offer debt management counseling to their students.

Counseling sessions ought to provide much more than the government requires. Students need to know that learning about loans isn’t just a one-time event, and they will need a team of people to help them make sense of the overall financial aid process.
Source: The New York Times, “Counseling on Student Loans Now May Ease Pain Later,” September 5, 2008.

Loans Get Students Through College. Support Reform that Gets Them Through Their Loans.

100 Cambridge Street, Suite 1600 | Boston, MA 02114 | 800.999.9080
© 1996 – 2012 American Student Assistance. All rights reserved.