Edufacts™
April 2007
Texas Students Receiving More Assistance To Avoid Defaulting On College Loans
Katie Tate is a junior community health major at Texas A&M University, and the first member of her family to ever attend college. Besides juggling her course schedule and an on-campus job, she is also learning the tough lessons of managing money.
As a first-generation college student whose family earns a yearly income of less than $40,000, Tate receives a $5,000 yearly grant from the A&M Regents Scholarship Program. The rest of her college tuition, books, and living expenses are financed through college loans. And whatever happens in her future, the native of the West Texas hamlet of Wall is sure of one thing: she will not be among the many who default on their college loans.
"Not having a background of support, it was important for me to understand my responsibilities," she said. "The information and support that I have received here at A&M has really helped. I've learned that some of the money I am getting is not an allowance, and I'll have to pay it back."
To be sure, default rates of college loans across the nation have steadily decreased over the past decade. There has been ample progress in Texas as well, although the state's default rate in 2004 was 6.8 percent, about a third higher than the 5.1 percent national average.
The recent trend across college campuses is to provide students with more tools and information to prepare them for their financial responsibilities once they leave school. The U.S. Department of Education also recommends that every school implement a default prevention and management plan to provide a comprehensive and holistic approach that goes beyond the campus financial aid office. The idea is to identify students early in the recruitment process and provide them with pertinent information from as many sources as possible throughout their college experience.
While few colleges have implemented comprehensive default prevention plans, many in Texas are expanding outreach to students and providing them with more information. Heather Parsons, the default aversion officer at Texas A&M, said communications efforts with students "incorporate the entire university." Students are offered budgeting workshops, financial literature, and a course called "Succeeding in College" to prod them to adequately prepare for their post-collegiate future.
"We are constantly touching students, and encouraging them to take responsibility for their finances," Parsons said.
Felipe A. Leal, the assistant financial aid director at Texas A&M University-Kingsville, said involving lenders in default aversion efforts at his school has had a dramatic effect in stemming previous alarming default rates. In 1999, A&M-Kingsville had a default rate of 20 percent that was quickly climbing to 25 percent.
"We invited lenders to campus and asked them to work with us - to be part of the team and to communicate one-on-one with students. It was an awakening. We had to seriously focus on our high default rates," Leal said.
Two years ago, A&M-Kingsville also started requiring students who receive financial aid to enroll in on-line sessions of "Mapping Your Future," a collaborative, public-service Web site that provides free college, career, financial aid, and financial literacy services for students, families, and schools. The program, which was developed by TG and other student loan guarantors, also enables students to receive consistent loan management and default prevention information.
These preventive efforts at A&M-Kingsville — where 85 percent of its 7,000 students receive some type of financial aid — have produced remarkable results. The default rate at the school is now 7.2 percent.
Many other schools across Texas are learning that students can best be helped with early loan education and financial management tools. And for students, the most important lesson is to borrow wisely and to plan ahead for debt repayment.
Katie Tate, the first-generation Texas A&M student, also has learned a key life lesson in personal finances.
"You should spend your money on the important things you need, and not on what you want," she said.
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For tips on how to establish high expectations for students as early as middle school and for assistance in planning for higher education academically and financially, visit www.AIE.org. TG provides this Web site as a public service to help all families and students achieve their educational goals and career dreams.
About TG
TG is a public, nonprofit corporation that administers the Federal Family Education Loan Program (FFELP). High resolution files suitable for publication are available as a free download from TG's web site at http://www.tgslc.org/edufacts/index.cfm. For more information, please e-mail or call ray.perez@tgslc.org or (512) 219-4990.
