Although their football program undoubtedly gets more headlines, there’s another squad on Indiana University’s Bloomington campus that has a much more lasting impact on students: the I.U. “Money Smarts Team” – specially-trained students who provide one-on-one financial counseling to other students.
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This is not MBA-level material. It’s about basic, everyday topics such as: How to create- and stick to- a budget. Managing credit card debt. And how to “make more informed financial decisions so they can borrow less,” explains Phil Schuman, director of the school’s Financial Literacy program. (1)
It all started because of a growing concern on the part of university officials: an increasing number of graduates were walking away with a diploma and a significant amount of student loan debt. Recognizing that students might be more receptive to advice that’s provided by someone their own age, creating the Money Smarts Team was the first step toward addressing this.
In addition to helping with current money issues a fellow student might have, counsellors also try to inject a dose of reality to prepare them for what life will be like once mom and dad are no longer paying the bills: What kind of salary can you realistically expect to make after graduation? That you probably won’t be able to just buy anything you want because your paycheck has got to cover rent, utilities, food, healthcare and commuting expenses. Any by the way, it’s really important to start contributing to your company’s 401(k).
“We Interrupt This Loan Offer….”
Phase two was to re-structure the way the university communicates with students about financial aid.
Today, this means clearly breaking down each student’s aid package- by type of assistance, amount and responsibility. Such as, “These are your grants. You don’t have to repay these,” explains Financial Aid Director Jim Kennedy. Loan amounts are listed separately and it’s made clear that these do have to be re-paid. Students are also informed that just because they qualify for a certain level of loan, they don’t have to accept the whole amount. Work-study aid is another category.
“When we start the financial aid process,” says Kennedy, “we want to have as many interruption points as possible.” This goal is to make a student stop and think about their future financial responsibility.
The first interruption occurs after the student completes the financial aid application (FAFSA) and receives their award notice. “We require the student to accept the loan on our website. There they get the option to look at the loan and reduce it. To decide how much they really need.”
In addition, each year a student is sent a letter that sums up their accumulated loan amount. In Kennedy’s words, it makes them stop and realize, “‘I’m a sophomore. Here’s my debt.’”
Upon graduation, I.U. students go through an exit loan process.
According to Kennedy, the best part is that this approach “creates a lot of questions from students. We want [them] to know the composition of their loans, what their estimated payments will be and their repayment options.” Links to the university’s website provide additional information.
Helping students understand the amount and ramifications of their loans also reduces the shock-and-awe impact upon graduation. “There are no surprises,” says Kennedy. Students are encouraged talk with the university’s financial aid counsellors as well as seek peer-to-peer advice from the Money Smarts Team.
The 4-Year Rule
At the risk of sounding old-fashioned, back when I went to college, the expectation was that you would walk away with a degree in 4 years (or less). Students who took longer to graduate were considered slackers, as in, “Geez, I can’t believe he still hasn’t passed English 201!”
But in the past 20 years the opposite trend has emerged: students who finagle a way to postpone graduation are often considered not just lucky, but smart. After all, college is the last stop before you hit the real world. Why not extend it another semester- or two- if you can?
“For financial aid purposes, you only need to take four courses per semester,” explains Kennedy. That’s considered ‘full-time’. Why kill yourself?”
The problem is, the longer you extend campus life, the more debt you rack up. It’s not just the cost of tuition. There’s rent, food, books, visits home, concert tickets, etc.
Enter the third phase of I.U.’s initiative to reduce student loan debt: the “Take 5” campaign. Students are encouraged to sign up for five courses each semester so that they can accumulate the credits they need to graduate in four years. Interactive degree maps online show a student what classes toward their major they’ve completed and which ones are left so that they can clearly see what they still need to take in order to graduate in four years.
According to Kennedy, the message is sinking in. “Now more students are taking more credits.”
However, the real measure of the success of Indiana University’s financial literacy campaign is this: In two years, undergraduate borrowing dropped $44 million.
1. If your student doesn’t attend Indiana University, follow this link toStudent’s Guide to Credit http://assets.creditrepair.com/students-guide-to-credit.pdf