Exit Interviews: Too Little, Too Early, Too Important to Give Up

As the summer approaches, financial aid officers on college campuses have just completed exit interviews for federal student loan borrowers, which explain students’ repayment rights and responsibilities. For many, exit interviews may have seemed a worrisome and empty exercise: Worrisome, because these graduating students will soon be responsible for repaying significant amounts of debt that they may not completely understand; and empty, because exit interviews often seem a rote exercise through which students sit with glazed eyes and blank expressions.

The truth is that exit interviews cannot be the end of financial literacy and repayment guidance in the federal loan program. ASA’s research has shown that borrowers respond best to the right information at the right time—and virtually ignore mistimed and mismatched messages like those conveyed through exit interviews. Student borrowers need better guidance—in a more appropriate format, at a more relevant time, and for as long as it takes until the journey of repayment is complete.

Guarantors such as ASA are well positioned to supply this extended repayment guidance. As non-profit organizations, we have borrowers’ best interests at heart. We have a track record of proven default prevention results—particularly guarantors who have entered into Voluntary Flexible Agreements with the Department of Education, like ASA.

Unfortunately, recent regulations have placed non-profit guarantors in the same category as for-profit lenders and have restricted us from attending entrance and exit interviews in partnership with schools. Luckily, we can continue to offer entrance and exit materials to schools to ensure that student borrowers understand their loan obligations as they leave school and enter the working world.

Yet guarantors are capable of providing a great deal more than exit interview handouts to help student loan borrowers manage debt. Individual guarantors have created on-campus trainings on budgeting and financial literacy, both in direct-to-student and train-the-trainer formats for financial aid professionals; outreach programs for students after they leave school; Web-based tools; and more.

How can public policy help to ensure that guarantors continue to invest in these expanded debt management services? First, we should formally transition the guarantor’s primary role in the federal student loan program from collector of defaulted loans to provider of debt management services. Second, in line with this to move, the guarantor financing structure must be changed to align our incentives with our new function.

I believe that every federal student loan borrower deserves a financial literacy program that follows the lifecycle of the loan. The federal student loan program has a responsibility to equip borrowers with the tools to manage and successfully repay their loans. And that’s going to take more than requiring students to sit through an hour-long exit interview that stands between them and their summer vacations.

Posted by Shelley Saunders on May 29, 2008 at 01:41 PM EST

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