The WASFAA News
       Summer 1999 Online Publication       
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FFELP and DL Update
Debt Management Emerges as Main Priority in EDFUND Surveys
by Rick Cabral, EDFUND

In recent surveys commissioned by EDFUND, the subject of default prevention emerged as a high priority, which came as little surprise. However, students and financial aid officers alike feel a more personalized approach to default prevention is needed.

In EDFUND's 1998 survey of schools and lenders, nearly two-thirds of guaranty agency respondents indicated they were definitely or probably interested in participating in the planning and design of an outstanding default prevention program. This points to the importance of debt management in student financial aid.

When asked to characterize an "outstanding default prevention program," nearly half (49 percent) said the program should involve proactive education and counseling of students. Another 30 percent cited frequent communications among all parties to the loan, and 13 percent said the program should foster knowing the student's loan history to provide appropriate counseling. Somewhat surprisingly, just 4.5 percent felt an outstanding program should develop on-line, or web site, assistance to facilitate entrance or exit counseling.

This last comment was further reinforced in focus group interviews conducted this year with students and school financial aid officers in Arizona, California and Washington. Both groups saw the need for a more personalized approach as extremely important, especially in view of several misconceptions about student debt load and repayment.

For instance, financial aid officers and staff believe they are getting through to students about the loan process and repayment, however, student comments showed that isn't true. The focus groups also demonstrated that students often don't know how much they've borrowed (or intend to borrow), and that they will frequently borrow more than they need. Perhaps most disturbing of all is the notion that what students need is more information about student loans and repayment, when what they appear to need is more personalized financial planning and debt management advice.


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