Improving Federal Student Loan Counseling for Our Students

Student loans play a considerable role in how college students finance their education today. As student loan borrowing grows in prevalence, policymakers are increasingly aware of the need to improve its system of lending to students. An area of policy reform that would improve borrower experience and has bipartisan consensus is that borrowers should have more effective loan counseling.

NCAN specifically recommends that student loan counseling should:  

• Be consumer tested to ensure effectiveness. 
• Be done on a timeline that allows the student, if needed, to decrease their borrowing amount for the year. 
• Include the cumulative debt for the borrower to date.
  

Currently, to borrow federal student loans, students must complete an online session of entrance counseling (said to take roughly 30 minutes) – and sign a legal agreement, called the Master Promissory Note (MPN), which details the terms and conditions of borrowing.

Experts believe the existing requirements and counseling methods are inadequate and ineffective towards the goal of more informed student borrowers. For example, considerable research indicates that student borrowers lack key information regarding their loans and, ultimately, how much they owe (e.g., Whitsett, 2012; and Andruska, Hogarth, Fletcher, Forbes, & Wohlgemuth, 2014). Students deserve more in the way of consumer-tested counseling that is informative and understandable. 

Federal Student Loan Resources:  

• U.S. Department of Education - College Scorecard
• Office of Federal Student Aid - Annual Student Loan Acknowledgment
  

Other Resources:

• The Institute for College Access & Success - Project on Student Debt and College Insight
• National Association of Student Financial Aid Administrators - Enhanced Loan Counseling Recommendations