As of May 2017, the total amount of student loan debt sits at $1.44 trillion. Let’s put that into perspective – you could order 242,016,806,723 Chick-fil-a Chicken Sandwich meals to equal the amount of student loan debt in our country. That’s a lot of sandwiches and waffle fries.
In 2016, the number of defaulted student loans hit a record high – eight million borrowers had thrown in the towel on repaying their debt. So how, as a university or institution, can you help prevent your students from being one of those who can’t face their student loans? Here are three tips to help prepare your students.
- Know the Loan – For most students, a loan for education will be the first loan they’ll take out. There could be a knowledge gap in understanding how their loan works and what it all means for them in the future. Encourage students to become familiar with their loan. Help them answer these questions – What’s the principle amount? What’s the interest rate, is it subsidized or unsubsidized? Is the interest deferred while in school? When does your repayment start after graduation? Knowing the answers to these question can prevent a lot of confusion when repayment comes around.
- Explore Options – Encourage students to explore their repayment options. Some students will qualify for an income-driven repayment plan or even defer their payments a little longer after graduation. Will their career field allow them to have loan forgiveness if they make the minimum payment for 120 months? Helping borrowers understand their options can help prevent confusion and prevent student loan default.
- Understanding the Consequences – Borrowers should understand not making a monthly student loan payment will hurt them more than not making a payment during a financially stretched month. Interest rates and late fees will kick in. Help to understand there are no statute of limitations on student loans so their potential wages could be garnished and tax refunds taken.
Ways to reach students while in school could include exit interviews with the financial aid office. Get the conversation with students at the start of college with session in a freshman seminar class. Follow up with borrowing students while there in school with emails and required online seminars. You can even provide a repayment toolkit much like the University of California, San Francisco has for students and graduates. Education is key when it comes to helping students understand the responsibility they now possess with their student loans.
If you’re looking for a partner in working with your students for collection services, connect with us. We’ve worked with over 300 universities to provide services including default aversion, primary and secondary debt collection for Perkins loans and institutional loans.