Thinking Out of the Debt Box
by Kathleen Gibbons, Nellie Mae

With the abundance of acronyms and financial aid-ese that have characterized our industry since the days of BEOGs (Basic Educational Opportunity Grants), it's easy to see why much of our communication is a jumble of jargon! Even terms as seemingly straightforward as cost of attendance (COA) and expected family contribution (EFC) can be troublesome to new college students and parents - especially when mixed in with FAFSA, SAR, SAP, and MPN.

Not only are many of our industry terms confusing, some just plain don't fit anymore. Take "financial aid," for example. While it's most recognized, the term "Financial Aid Office" no longer accurately describes the range of services provided by many offices. Increasingly, aid offices are replacing "financial aid" with "financial services" to provide a more broad and inclusive description of the full scope of their activities.

Another term that has outgrown its use is "debt management." It has become a sort of catchall for everything ranging from borrowing to budgeting to credit card use to repayment. That we lump all these topics together under one heading is not a bad thing; however, the problem is that "debt management" really refers to activities that happen after incurring debt. The term doesn't accurately describe financial planning activities that aid officers so conscientiously try to emphasize to students before borrowing.

Debt also carries a negative connotation. Although it's a fact of life for most of us, being in debt still brings a perception of vulnerability. Popular film and literature are filled with characters like George Bailey in It's a Wonderful Life and Tom Joad in the Grapes of Wrath who, though noble and ultimately heroic, are portrayed as vulnerable and weakened by their indebtedness. It's only when these characters break out of debt and out of the grips of their controlling benefactors that they become empowered. In our society, being in debt is equated with not having control over one's fate.

What's needed in the financial aid industry is to replace our familiar uses of the term "debt management" with a label that more accurately describes the full continuum of planning and paying for one's education. For example, although it's a bit of a mouthful, the term "education planning and financing" suggests something more holistic, proactive and empowering than "debt management." The whole notion of planning brings up a sense of control and desired outcome, which the planner actively makes happen. It communicates positive energy. It makes the planner want to participate.

Changing a name is the easy part. We also need to create new strategies that give students both the motivation and the tools to be active participants in their education planning and financing. This is not news to financial aid officers and many schools have developed creative programs to try to enhance their entrance and exit loan counseling on-line. Lenders and other industry partners have also contributed to these efforts by providing web sites which give access to customizable calculators that can help students learn about budgeting, compare loan programs and predict repayment outcomes.

However, despite the many tools and programs available to help students successfully finance their education, we're still somewhat missing the mark. The majority of students still borrow with little forethought and enter repayment unprepared for the extent of their debt. Financial planning must become more integrated into the educational experience so that all students take part. The challenge for partners in the financial aid industry is to begin "thinking out of the debt box" by transforming existing uses and approaches to debt management into a comprehensive framework for education planning and financing.