The Department of Education recently announced intentions to increase loan counseling requirements for certain student loan borrowers. These counseling sessions are meant to improve the borrower’s understanding of his or her student loans and how to pay them. The current requirements have borrowers attend two loan counseling sessions: at the onset of college and at the end of college. The increase in requirements may lead to consistent counseling sessions throughout college for Direct Loan borrowers.
This pilot test from the Department of Education will award Direct Loans under the condition that borrowers attend multiple counseling sessions. The Direct Loans program involves Stafford Loans, Parent PLUS Loans, Federal Consolidation Loans, as well as Grad PLUS Loans. The counseling is to be provided by the schools and universities. There are several desired outcomes.
The first and foremost outcome simply involves a better overall understanding of student loans per borrower. It is thought that more counseling will lead to more informed decisions when borrowing. This helps keep certain students from signing on to a boat-load of debt. This helps out individual borrowers from taking on debt, and it helps limit the expansion of the current student loan issue.
Another desired outcome involves debt management. With more counseling, borrowers with student loans should be able to manage their debt more efficiently. The benefits of this are obvious. This helps limit the strain on individual borrowers, and it also keeps the student loan crisis from growing.
An important outcome of this new policy is research. It is currently unclear how effective loan counseling is. By increasing the prominence of these services, the Department of Education wishes to observe the effect of counseling on the student loan situation at the macro level and well as micro level. While these two outcomes are important, it is equally important to figure out if these outcomes are directly associated with increasing loan counseling.
There are several options for colleges who are participating. Institutions may provide the Department of Education’s Financial Awareness Counseling resource. They may provide their own counseling if it meets the Department of Education’s requirements. Finally, they may provide third party counseling resources. Each institution is to provide these new services to a set of students while providing the old services to a control set of students.
The end result of this new objective is simple: improved education. It is commonly quoted that loan education is not up to par. This is simply a way to combat that issue. The means to this end simply involves loan counseling resources being more readily available. The interesting part about this is going to be the comparison between the control group and experimental group. The defining metrics of this study are most likely going to be the differences in debt and loan performance between these groups.