2/14/2015 Student Loan Counseling

Student Loan Counseling:

A multi-phase project on student loan counseling and its efficacy

Carla Fletcher Senior Research Analyst, TG

Outline

? Pol i cy cl imate ? Legi slative a nd regulatory hi story ? Res earch literature revi ew ? Student observations: Exi t counseling ? Student observations: Entrance counseling ? Evi dence-based promising practices ? Next s teps

Outline

? Policy climate ? Legislative and regulatoryhistory ? Research literature review

? Student observations: Exit counseling ? Student observations: Entrance counseling ? Evidence-based promising practices ? Next steps

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Policy Climate

? Lack of college affordability ? The Great Recession made repayment challenging,

even for good students from affluent families ? Harsh consequences for poor decisions that lead to

defa ul t ? President Obama's Executive Action ? Congressional proposals

Legislative and Regulatory History of Loan Counseling

? (1986) Fi rststatutory mandate for exit counseling ? (1989) Required entrance counseling and s pecified

i nformation to s hare ? (1998) Cl a rified that electronic delivery of exit counseling was

a l lowed ? (2000) Explain MPN, consequences of default a nd the

ma ndatory nature of repayment ? (2008) Interactive programs for counseling, role of lenders,

a nd added i nformation requirements

Literature Review

? Student comprehension ? Delivery method ? Timing ? Complexity and volume of information

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Outline

? Pol i cy cl imate ? Legi slative a nd regulatory hi story ? Res earch literature revi ew

? Student observations: Exit counseling

? Student observations: Entrance counseling ? Evi dence-based promising practices ? Next s teps

Current Title IV Loan Counseling

? Dominated by ED's online tools (free, scalable, legal)

? 70% uti lization among fin aid offices ? 90% of offices i n budget crunch cut face-to-face first

? No theoretical or practical evidence on effectiveness among actual users

Exploring Effectiveness: The Research Design

? 75-80 us er experience tests ? Actual borrowers doing the actual counseling ? About half exit counseling, half entrance ? Accompanied by surveys

? 12 s chools ? Di versity of s ector, region, gender, a ge, ra ce, parent's

educa tion, l evel of financial l iteracy & fi na ncial aid a wa reness

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Some Positive Themes

? They take this seriously; begin with full tanks ? They know the basics and want specifics ? They are optimistic about repayment ? They prefer items specific to them and their

money

More Positive Themes

? They like the interactive elements ? They like auto-population and logic ? They really like the detailed repayment plan

comparison chart ? Most understand importance of servicer

Negative Themes:Pop-up Quizzes

? Signals that the information is important ? But students perceive it to be trivial

? Common sense ? Uni mportant detail ? Too easy to cut and paste the answer ? Has unintended consequence of devaluing the experi ence

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"The questions are weird. It's like either something really basic or some crazy detail. They're definitely not teaching me anything

important."

Negative Themes: Skip Dynamic

? Borrower is confronted with irrelevant information

? MPN during exit ? Eligibility criteria for PLUS loans during exit ? Relief options for FFELP loans they don't have

? Leads to devaluing the experience

Uniform

High Importance

Met icu lo u s R ead in g

Ir r elevan t Material

In at t en t io n , Un if o r m

Devalu at io n

Skimmin g

Selective R ead in g

Lack of Dif f er en t iatio

n

Severe Inattention & Fr u st r at io n

In co r r ect Skip p in g

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