jessica barrett simpson, elizabeth coogan | dec. 2014 u.s. department of education 2014 fsa training...
TRANSCRIPT
Jessica Barrett Simpson, Elizabeth Coogan | Dec. 2014
U.S. Department of Education
2014 FSA Training Conference for Financial Aid Professionals
Session 37
Financial Literacy Resourcesand Updates
What Student Borrowers Need to Know
Agenda
2
1. Introductions
2. The Knowledge Gap
What do students know (or not know) about borrowing?
3. Financial Literacy and Decision Making
What do student borrowers need to know?
4. Resources and Best Practices
Introductions
3
Jessica Barrett SimpsonSenior AnalystCustomer AnalyticsCustomer Experience OfficeFederal Student [email protected]
Elizabeth CooganSenior Advisor on Financial LiteracyCustomer Experience OfficeFederal Student [email protected]
The Knowledge Gap
4
1. Where do students get their information on borrowing and repayment?
2. Do student borrowers understand their loan repayment options?
3. Once they complete or leave school, what do they wish they had done differently?
4. What are the characteristics of student borrowers who need this information the most?
The Knowledge Gap: Sources of Info
5
Students get most of their information on financial aid from their school’s financial aid office
Top 5 Ways Financial Information was Received %
Talking with financial aid counselors at your college or university 78%
Other online resources from your school’s office of financial aid 65%
Printed materials from your school’s office of financial aid 63%
Talking with friends or family about financial aid 59%
Talking with other staff or faculty at your school 52%
SOURCE: FSA survey of borrowers in school, 2014.
The Knowledge Gap: Sources of Info
6
Borrowers in their grace period get most of their information on repayment options from their loan servicer and FSA websites
Top 5 Sources of Info on Repayment Options %
Online loan servicer account management 43%
Studentloans.gov website 27%
NSLDS website 19%
Phone number for loan servicer 17%
Studentaid.gov website 17%
SOURCE: FSA survey of borrowers in grace, 2013.
The Knowledge Gap: Sources of Info
7
• Borrowers in school give high ratings for entrance and exit counseling, finding it to be helpful, convenient, and clear
• However, only half of those in grace report that they received exit counseling
SOURCES: FSA survey of borrowers in school (2014) and in grace (2013).
The Knowledge Gap: Repayment
34% of borrowers in their grace period report not being aware of their repayment options
28% are undecided about what action they will take on their loans at the end of their grace period
33% of those planning to go into repayment at the end of their grace period either don’t know or are undecided about their repayment plan
SOURCE: FSA survey of borrowers in grace, 2013.
8
9
The Knowledge Gap: Repayment
SOURCE: FSA survey of borrowers in grace, 2013.
Have you considered Income-Based Repayment or Pay as You Earn?
The Knowledge Gap: DecisionsWhat information do you feel you still need to help you make a decision about the right payment plan for you?
•I don't know any of the other option plans other than the standard repayment option•I did not even know there were any options. I just figured the bill would come and I would need to pay what it says•I really need to take some time and look at all the options but I feel a bit overwhelmed every time I do•A customized breakdown of my student loans other than examples presented•I wish there was a calculator of some sort so that I could put in my information without having to go through the actual process of choosing an option
10
SOURCE: FSA survey of borrowers in grace, 2013.
11
The Knowledge Gap: Actions
SOURCE: FSA survey of borrowers in grace, 2013.
If you could go through the process of taking out loans to pay for your education all over again, would you take the same actions or make a change?
When you first enrolled in school, you may have had an idea of how much you expected to borrow in student loans. Now that you are finished, did you end up borrowing more or less than you initially anticipated?
12
The Knowledge Gap: Actions
SOURCE: FSA survey of borrowers in grace, 2013.
If I could do it all over again…• I would begin paying my loans during my studies • I would have taken all subsidized loans and no unsubsidized ones• I would have taken out just enough and not the maximum amount• I would pay interest as I went• Pay some early on loans• Rethink how to spend my loan• Take more classes per semester to cut down on cost• I would borrow less, have a better understanding of loan repayment
options, and not accept refund checks to make my loan smaller• Find out exactly how much I am borrowing• Found other resources and researched how much education would cost• Get a loan counselor
SOURCE: FSA survey of borrowers in grace, 2013.
13
• Students often borrow more than they expected• Many are not aware of the options for loan repayment other
than the standard 10-year repayment plan• Many do not have enough information about income-driven
repayment plans• Without enough information, it is hard for them to make an
informed decision about repayment• Customized tools exist to help them understand their options,
such as the Repayment Estimator and FACT• Many borrowers access the tools, but not all are aware of them• FAAs have a window of opportunity while students are in
school to ensure students have the info they need
14
The Knowledge Gap: Summary
Students Most at Risk of Default
• Non-completers
• First-generation
• Non-traditional - age 25 or older
• Has dependents
• Not academically prepared – low high school GPA and/or
low standardized test scores
Note: FSA conference sessions #24 and #36 address in detail how to
help student borrowers at risk of default
15
• Timing matters: Information is needed at the point where decisions are made
• Make it simple: Don’t overload with information. Focus on the basics
• Information should be both push (sent out) and pull (available upon request)
• FSA resources are available: The Repayment Estimator, the Financial Aid Awareness Counseling Tool, publications, videos, infographics, social media, and more
16
The Knowledge Gap: How to Help
What is Financial Literacy?
17
“The ability to use knowledge and skills to manage financial
resources effectively for a lifetime of financial well being.”
2008 Annual Report, President’s Advisory Council on Financial Capability
Personal Finance State Requirements
18
SOURCE: Council for Economic Education, 2014 Survey of the States, http://www.councilforeconed.org/news-information/survey-of-the-states/
Financial Literacy State Rankings
2013 National Report Card on State Efforts to Improve Financial Literacy in High Schools
SOURCE: Champlain College’s Center for Financial Literacy,http://www.champlain.edu/centers-of-excellence/center-for-financial-literacy/report-making-the-grade
19
Basics for Student Loan Borrowers
20
Budgeting Borrowing Repayment Strategies
21
Budgeting
https://studentaid.ed.gov/sites/default/files/budgeting.wmv
•Only borrow what is needed• Free money first• Federal loans vs. private loans
•Keep track of what is being borrowed
•Know what is owed prior to entering repayment
•Pay interest while in school
22
Basics for Borrowers
23
Financial Awareness Counseling ToolThe Financial Awareness Counseling Tool (FACT) is on Studentloans.gov
24
Financial Awareness Counseling ToolExpenses Funds
The Financial Awareness Counseling Tool (FACT) is on Studentloans.gov
How Schools Are Using FACT
Incorporating FACT into the financial aid process
• Encourage completion of FACT before disbursement of any loan
• Direct students to FACT after completing promissory note
Utilizing FACT as a resource
• Include as part of annual loan counseling on default aversion
• Incorporate into student success courses
• Direct link on financial aid office home page
25
Repayment Strategies
Basic fundamentals of a loan• Loan fees• Interest rates
• Capitalized interest• Daily interest formula
Rights and responsibilities• Benefits of a federal loan
Loan servicer• Know who to contact and how
26
27
Repayment Estimator
StudentAid.gov/repayment-estimator
28
StudentAid.gov My Federal Student AidNEWNEW
FSA Publications
29
StudentAid.gov/Resources
30
FSA on Social Media
Leverage FSA’s social media messages to do your own outreach
http://www.financialaidtoolkit.ed.gov/tk/outreach/social-media.jsp
Videos
31
Infographics
http://visual.ly/users/federalstudentaid
Financial Aid Toolkitwww.financialaidtoolkit.ed.gov
33
Financial Aid Toolkit: Financial Literacy
34
Search for Financial Literacy Resources
Successful Outreach
35
Campus-Based
•Presentation to freshmen and transfers•Program for students and alumni for career exposure and loan management•One credit course on financial education•Financial Wellness part of Office of Student Services, Student Health•Money management fairs with prizes•Financial literacy for students with SAP issues •Students and teachers provide free tax assistance and financial literacy information•Deliver to athletic teams and housing students
Successful Outreach
36
Delivery Methods
•Peer counselors trained for personal finance counseling/coaching•Financial Aid office provides sub for absent professors•Near-to-peer counselors deliver to secondary students•One-on-one counseling/coaching
Third Party Resources
•Loan servicers•Non-profit organizations•State and regional associations•Mymoney.gov
Profile: IU and Financial Literacy
37
• New Office of Financial Literacy
• MoneySmarts.iu.edu portal for financial literacy programs
• One credit courses on financial management
• Peer-to-peer advising SOURCE: http://news.iu.edu/releases/iu/2014/02/fewer-students-borrowing.shtml
Profile: IU and Financial Literacy • Annual “debt letter”
explaining how much students owe and the estimated amount of their monthly payments
• Results: borrowing decreased by 12% from 2012/13 to 2013/14
• Standardized student aid letter that clearly separates grants from loans
38
Profile: IU and Financial Literacy
• Calculator to estimate income after graduationhttp://moneysmarts.iu.edu/resources/paycheck-estimator.shtml
39
Share Your Best Practices
40
41
QUESTIONS?