As many of you have probably noticed, debt management is quickly becoming a necessary component of any school’s borrower outreach. While some schools may already have programs in place, for many it’s a relatively new process.
One school that recently launched a brand-new program is the Graduate Theological Union (GTU). We spoke with Carlos Perez, director of financial aid for GTU, on how this new program came about and what it has accomplished.
Although the program is young, here’s what some students are saying:
“[The program gave me] a very strong knowledge of credit. Students should be aware of where they fall in the real world after it’s all done.”
“The credit information was very helpful. [The presentation] was great in delivery and content.”
Out with the old
Graduate Theological Union, a consortium of ten graduate theological schools in the San Francisco Bay area, is in a location with a very high cost of living. Add college tuition, and many students at GTU are forced to take out a lot of money in loans. Because most students at this theology school will go into jobs such as ministry, social services, and teaching, they will fall into a high-debt/moderate-income group.
Carlos Perez, director of financial aid at GTU, and Kathleen Antokhin, assistant director of financial aid, were concerned that while students were taking on more and more debt, many were not aware of how their borrowing was going to affect them in the future.
Studying as a graduate student in the San Francisco Bay area, “it’s easy to accumulate a lot of debt in a short period of time,” says Carlos, “[in the process of implementing our program] we found that many of our students didn’t know how much money they had borrowed to date and did not project how much they would graduate with later.”
GTU’s old debt management program included mandatory entrance and exit counseling and optional debt management workshops. Yet attendance was very low for the optional workshops — just around 5 percent — and the financial aid team felt the program wasn’t enough.
“We felt we needed something more rigorous,” Carlos says, “so we decided to develop a new program.”
Taking a personalized approach
GTU’s new program is based on tiers of debt – the more debt a borrower has, the more debt management education is required.
All borrowers are required to complete two worksheets at the start of each year. First, they must complete a budget worksheet indicating their expenses and their resources, to help them determine how much to borrow. Second, they must complete a loan worksheet listing their outstanding loan debt along with estimates of monthly payments under various repayment plans Students also use an online calculator to determine the income level necessary to affordably manage repayment.
Borrowers who have $50,000 or more in debt must also attend a debt management presentation that covers credit concepts, budgeting, and encourages students to borrow less whenever possible. Borrowers who have $75,000 or more in debt must attend a one-on-one counseling session with a financial aid officer in addition to the debt management presentation and the worksheets.
The new program was designed to make students more aware of their debt and repayment options as well as to better prepare them to make informed financial aid decisions. “We wanted to make sure students are aware of their borrowing while in school and of their repayment options in the future,” Carlos says.
Lessons learned
Implementing the new program was a relatively smooth process, according to Carlos. “The biggest obstacle was figuring out how to structure the program,” he says, “but it all came together. Kathleen took the lead on developing the comprehensive plan and everyone at the financial aid office had the same goals.”
GTU has three full-time financial aid officers and about 500 borrowers. The new program took a few months to develop, and while implementation certainly increased the workload for the financial aid staff, Carlos points out that once all the necessary tools are in place, the process will run more smoothly. “We expect this program to take up much less time next year,” he says, “once all the forms and the plan are set up, it should take up much less time.”
“So much of it is planning ahead,” he notes. One of his suggestions – pick a slower time for your office to conduct presentations and counseling sessions.
A sign of the program’s success has been a jump in workshop participation, which jumped from 5 percent to about 80 percent. “The higher participation rate is the greatest success I’ve seen so far,” he says.
And the student response has been overwhelmingly positive, which was a relief to the financial aid staff, as there were concerns about how students would feel about the new requirements.
“There was some resistance from a small number of students, but overall, the feedback we got was positive. We have had students come up and tell us they appreciate the work we’re doing and that they benefited from program,” says Carlos. “And we feel good that we’ve given borrowers the information they need to make good decisions.” Even the increased workload for the office has been worth it, he says: “The counseling sessions have helped us to better connect with our students. We think many students now look more closely at how they can change their borrowing and spending habits.”
GTU is committed to continuing the program and looking at its impact over the next few years. If the information is helpful to borrowers, the financial aid office will change the requirements to include more students. “If more students benefit from this program,” Carlos says, “we will lower the threshold. For example, instead of having one-on-one counseling sessions for borrowers with $75,000 or more in debt, we may make that requirement $60,000 or more. We’ll just have to see how it goes.”
While many more measurable effects of the program still remain to be seen in the coming years, Carlos feels the program has already made a difference. “Any student we reach we count as a success.”
Do you have an example of a debt management idea you’ve implemented? Share it with your colleagues here.