Before they receive federal loans, Tidewater Community College students will be required to draw up a personal budget showing how they’ll pay their bills before and after graduation, including student loan repayments, reports Inside Higher Ed.
The average one-year loan debt at the Virginia college was $3,990 last year; the college’s cohort default rate for 2008 was 7.6 percent.
However, Tidewater President Deborah DiCroce wanted to do more to help students “borrow responsibly” and make “sound investments” in their education.
“It’s not a handout,” DiCroce said of student loans. “It’s not something that goes away when the college experience is completed or not completed. There’s a commitment to repay a loan that has as much weight to it as any other kind of borrowing one might do. My concern, as we are ramping up our financial aid program, is keeping a close eye on our default rates, as one of our measures of accountability. It just became clear that we needed to take a step beyond what the feds require. Where is our responsibility to educate a borrower on this type of investment?”
It’s very easy for students to borrow thousands of dollars, said Daniel DeMarte, Tidewater’s vice president for academic and student affairs. “We needed to get them to slow down and require them to do some more thinking before we disburse anything. To do that we need to get them to think ahead, ‘What’s the return on investment?’ The second step is to keep in front of them and not forget that they borrowed money.”
Starting in the fall, each loan application will come with a repayment plan including the expected monthly payments and a summary of the student’s borrowing history at Tidewater and other colleges. Students will fill out two budget worksheets.
One asks the student to estimate his or her current monthly expenses — from rent and transportation to insurance and childcare — and income. The worksheet ends showing the student his or her remaining discretionary funds. Tidewater officials hope students will consider how their estimated student loan payments might fit into their current budgets if they left college, either by dropping out or by graduating.
The second worksheet asks students to fill out a similar budget to anticipate their financial situation after graduation. It includes resources to help them estimate their future job titles and average starting salaries in specific fields. Student loan payment is part of their new projected monthly expenses on this worksheet, which notes that loan repayments should never exceed 15 percent of one’s monthly income.
College officials will check to see if students’ plans are realistic. That may require hiring more financial aid advisers, but DiCroce thinks it’s worth it.
Comments & Trackbacks (1) | Post a Comment
at 6:46 am
[...] on Community College Spotlight: At a Virginia community college, students can’t get loans until they draw up a budget that shows current spending and how they’ll repay their loans once they [...]