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Effective Student Loan Counseling: Chapter Three

Effective Counseling Series

Betsy Mayotte, President | The Institute of Student Loan Advisors (TISLA)

Chapter 3: Effective Counseling Techniques

This article is the last in a series of three created for Iron Bridge Resources that will focus on ways your institution can improve student loan counseling.

In our first article we shared the data that shows that basic entrance and exit counseling is largely ineffective, with 40% of borrowers stating they don’t remember receiving the counseling at all. We also discussed the increased importance for a school’s bottom line and reputation to ensure that their students have the tools they need to successfully manage their student loan debt.

In our second article we discussed when exactly is the “right time” to provide student loan borrowers the counseling they need. Providing this information at the right time is the best way to ensure that such information is useful and has a positive impact on the borrower’s repayment strategies and outcomes.
In this article we will illustrate some effective techniques for ensuring the counseling you provide is effective and catches the attention of your audience.

Framing a Reasonable Outcome

One of the most effective things we as an industry can do to increase the effectiveness of our loan counseling is to throw out our current goal post. I, like many of you, have been working in this industry for decades – and it has taken me that long to learn everything I know about student loans. Meanwhile, we’re expecting student loan borrowers to learn it all in a thirty-minute counseling session.

We need to stop trying to get borrowers to remember hundreds of pages of regulations, but instead get them to remember where to go to find the information they need when they need it. Think about the most annoying commercial you can think of. I bet you change the radio or TV station within two or three notes of hearing that commercials jingle. But I also bet you know the phone number or website of that company by heart. This is the technique we need to adopt when it comes to counseling.
So when you’re developing your counseling, consider what success looks like. For most of us, success is ensuring borrowers have the tools they need to manage their student debt. Our approach so far has been to try to get them to carry all of those tools at once, all the time. Instead we should be ensuring they know where the toolbox is for when they need it.

Of course, that doesn’t mean just throwing www.studentloans.gov up on PowerPoint slide and sending them on their way. You need to let consumers know what options are out there, so they know what kinds of tools are in the box. But repeating that website and other robust

resources throughout your counseling is a good way to make sure that if they remember nothing else, your audience remembers where to go to find their student loan toolbox.

Play to Your Audience

To do that you have to know your audience. Assuming your student loan borrowers are all early 20-somethings is going to leave a large chunk of your borrowers underserved and uninterested. The majority of borrowers that reach out to TISLA are between 25 and 45 years old. In 2018, 7.6 million of the estimated 19.9 million college students were over the age of 25. That’s almost 40%. A quarter of all student loan borrowers today are over the age of 45 and the fastest growing age group are the over 65’s.
Each of these generations learns in very different ways. Here are some basics to keep in mind:

Baby Boomers
 Place importance in accuracy to detail and ease of use
 Consume printed materials but also still actively online (and will keep rising)
 Simplified design – want to find out information easily
 Primarily desktop-driven or tablet driven (less mobile)

So for this group, you will want to provide more guides and longer texts. They want detailed resources and respond well to testimonials from other consumers in their age groups. This audience is more likely to watch a thirty minute video.

Generation X
 Enjoy clear and concise information
 Mixture of mobile, tablet and desktop consumption
 Enjoy comparisons and reviews/ testimonials

You’ve got to tighten things up a bit for the 35-50 year old age group – but not too much. They will also watch a longer video if they have to, but they want to see more blogs and articles that have a bit more detail, but not as much as an entire guide or book would have. Keep your counseling thorough but limited to one topic at a time and you’ll get this group’s attention.

Millennials aka Generation Y
 Large internet users and can regularly multi-task so content needs to be attention grabbing
 React to incentives and offers
 Brevity is key – want information quickly
 Mobile driven (and tablet use)
 Articles or written content should be short and concise
 Imagery driven

If you’re using videos for this group – keep it short and sweet. No more than five minutes and that’s pushing it. Gamification can be an effective strategy if you’re trying to increase participation with these consumers. Shorter blogs, checklists and stories from other people in their situation are all effective tools for this group.

If you’re providing counseling for teens or younger, also known as the iGeneration or Generation Z, imagery, such as photos or memes are popular. They also prefer interactive content such as quizzes, especially if they can share their results later.

Case Study Based Counseling
Regardless of the age group you are working with, providing the counseling in a case study format rather than just a list of rules or facts is a much more effective way of helping the audience understand and absorb the information.

Case study-based counseling forces the user to interact with the content, which improves the chances of them remembering it. There was a reason we require students to do homework. The listening starts the learning process, but the doing cements it.

Here’s a simple example of case-based counseling:
“Sam must borrow $10K in student loans every year for his four-year degree. What will his payments be once he leaves school? What will his payments be under REPAYE if his AGI is 25,000 and his family size is 1? How much in total will he pay under each repayment plan? How much will Sam pay in interest under each plan?”

This is much more effective than simply telling a student that they will owe $40K once they finish school which will result in a payment of $500 a month.

There are many techniques out there that can improve the impact of your student loan counseling. What we’ve presented in this article series are what we have found to be the most effective in hopes that they provide you with the building blocks to create your own, customized and effective program.

Effective Loan Counseling: Chapter 2

Effective Counseling Series

Betsy Mayotte, President | The Institute of Student Loan Advisors (TISLA)

Chapter 2: Providing the Right Information at the Right Time

This article is the second in a series of three created for Iron Bridge Resources that will focus on ways your institution can improve student loan counseling.

In our first article we shared the data that shows that basic entrance and exit counseling is largely ineffective, with 40% of borrowers stating they don’t remember receiving the counseling at all.  We also discussed the increased importance for a school’s bottom line and reputation to ensure that their students have the tools they need to successfully manage their student loan debt.

Providing the right information at the right time can be tricky as the right time can be different for every borrower.  For many, it’s when the first bill shows up and they realize what their monthly payment will be.  For others, it’s a few years down the line when a financial crisis or milestone occurs.

 

Please see the link below to access to the full article.

Effective Counseling_Chapter 2_final

Effective Student Loan Counseling Series: Chapter One

This article is the first in a series of three created for Iron Bridge Resources that will focus on how schools and others can provide more effective student loan counseling to their students and alumni.  The author, TISLA President Betsy Mayotte, has been counseling student loan borrowers for over twenty years and has done extensive research on effective student loan and financial literacy counseling techniques.  You can download the full article here Effective Counseling_Chapter 1

Effective Counseling Series

Betsy Mayotte, President | The Institute of Student Loan Advisors (TISLA)

Chapter 1: Why Improving Student Debt Counseling is Important

This article is the first in a series of three that will focus on ways your institution can improve student loan counseling.

Entrance and exit counseling sound good on paper. Give students loan information before they start college and right before they leave. Provide them information about the terms of their loans, how to manage them, remind them how much they owe and how to repay them. But how effective is it? The data is certainly troubling.

Recent studies show that 40% of borrowers don’t remember receiving counseling at all and a third have no idea what the interest rate is on their student loans. Meanwhile the projected lifetime default rate for those that entered repayment in 2008 is almost 20%. Think about that next time you are in front of a group of students. One in five of those students is going to default on their student loans. For those of you with low cohort default rates, remember that the national cohort default rate for that same year was only 7%.

We can’t just blame the current entrance and exit counseling framework for these troubling statistics. Lack of a strong background in financial literacy is a real issue on the national level. A 2017 survey indicates that almost 70% of parents are reluctant to discuss finances with their children. Only 24% of Millennials and 38% of Gen-Xer’s could answer four out of five questions correctly on a standard financial literacy test. The U.S. currently ranks only 7th out of 15 countries when it comes to this same test.

Why Institutions Should Care About Effective Counseling
In short, the political and societal appetite for requiring institutions to have financial “skin in the game” is growing. This concept truly started to gain traction with a bipartisan proposal issued in 2015 that suggested several formulas that would result in schools being required to repay the Department of Education for some or all of their student’s defaulted loan dollars. These proposals were based both on a school’s default rate and repayment rate. There is in fact already a law on the books that requires certain foreign nursing schools that participate in the Direct Loan program to repay the government for some of their defaulted loans. Some might look at this law as a pilot program for future proposals.

Last year, a Republican reauthorization proposal called the PROSPER Act replaced cohort default rates with repayment rates at the program level, eliminating aid eligibility for those programs where too many students were not reducing their loan debt from year to year. While the Democrats Aim Higher Act offered no similar proposals, both sides of the aisle have indicated that some sort of risk sharing is still on the table in the next reauthorization, which could come as early as next year.

More recently, the current administration has proposed that “A better system would require postsecondary institutions accepting taxpayer funds to share a portion of the financial responsibility associated with student loans” and has pledged to work with Congress on the issue.

The bottom line is that even schools that enjoy low cohort default rates may have financial reasons to start better preparing their students to successfully manage their student loan debt.

The Three Prongs of Effective Loan Counseling
The three major factors as to the ineffectiveness of entrance and exit counseling are timing, topic and delivery. It’s about providing the right information at the right time. Our next article will discuss the first two prongs while the third will focus on learning how to reach your different constituencies in effective ways.