Let’s Talk Reality—Loans Are Part of the College Package for Most Families

This past spring, the Silva family, like millions of families around the country, received the financial aid package for the small, private college that was their son Adam’s first choice. But when they opened the package, they found something missing—the grant and scholarship aid they’d been expecting. Since Adam was a good student, and their family felt solidly middle-class, they were certain they’d qualify for much more grant aid than they actually received. Instead, the Silvas found that, like the vast majority of U.S. students, they’d have to borrow student loans to pay for Adam’s college education.

Why does the need to borrow loans come as such a shock to so many students and families? First, many families know about need-based grant aid provided by the federal government, such as Pell Grants, but few know that such grants rarely cover a student’s full financial need. Under President Obama’s plan for higher education reform, the maximum Pell Grant is set for a well-deserved rise to $5,500 in fiscal year 2010 and would then become linked to the Consumer Price Index for future years. However, it would still likely lag far behind students’ financial need. In fact, according to calculations by the Chronicle of Higher Education, the maximum Pell Grant would have to double overnight to even come close to covering the full cost of attendance at a public university—which includes tuition, fees, room, and board. Due to these costs, even students at 2-year institutions, or community colleges, borrow student loans, according to a recent study.

Families also may have seen the headlines about several high-profile, private universities such as Harvard unveiling plans to eliminate loans for low-income students. Yet the vast majority of schools have limited grant aid to give.

So, while students and families should apply for every grant and scholarship open to them, they should also face facts—loans will likely be a reality of their financial aid package.

Making Informed Decisions Through Early Education

Loans will be an integral part of the college experience for most students, and students deserve to make informed decisions about their financial futures. To keep families like the Silvas from getting caught unprepared, we as a society need to introduce the concept of loans as a normal part of the college experience early by:

• – Teaching students the basics of loan borrowing and repayment—as early as middle school
• – Explaining the average cost of attendance for community, career, public, and private schools, including non-tuition costs, and how much students may need to borrow in loans depending on the type of school they choose to attend
• – Comparing students’ loan repayment responsibility to their anticipated salaries and costs of living in a range of fields
• – Revisiting the topics of loans and debt management in an age-appropriate curriculum until high school graduation—and beyond

Of course, the quality of information that’s provided to students by high schools, colleges, college access programs, student loan guarantors, and state and federal government is not really the issue here. Rather, it’s the inequality of how that information is delivered. Some high schools offer in-depth financial aid counseling and seminars, others don’t; a few states mandate financial literacy classes for students, but most don’t. Some college financial aid offices sit down with each and every student loan borrower to discuss options, while others simply don’t have the resources to offer this luxury. And some borrowers receive outreach services from a guarantor, while those who borrow directly from the government do not.

Evolving the student loan guarantor to be a central point of contact for students and parents won’t magically ensure that every student and family gets equal access to information overnight, but it’s an important step in the right direction. Guarantors can work with the college planning resources in the communities they serve—with whom they often have longstanding partnerships—to raise public awareness about college financing. They can also coordinate activities, share materials, and publicize the local information resources available. After all, when it comes to developing information on planning and paying for college, there’s no need to reinvent the wheel—it’s the delivery mechanisms, and their reach, that need fine-tuning.

Posted by Shelley Saunders on June 18, 2009 at 02:22 PM EST

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