Student Loan Repayment Support

Melissa Maichle .

With the Supreme Court scheduled to issue a verdict on President Biden’s student loan forgiveness plan in the coming days, a final date may finally be available for when students are scheduled to begin their repayment later this year. If the Supreme Court decision occurs prior to June 1st 2023, for example, that means repayment on student loans would resume August 1st, 2003. On the other hand, if the ruling comes later (by June 30th), that would mean that the repayment date would move back to October 1st 2023. To assist with this process, Federal Student Aid has already begun publishing resources online providing assistance on how students might be able to prepare for the loan repayments to begin again.

Now, although there are sources affirming that the Biden Administration is considering policies for a phased restart to the collection of these payments, colleges and universities have a huge responsibility in their hands to begin preparing students for this event as well. This is particularly important considering the millions of students who graduated during the pandemic and have never made a single loan payment towards their remaining balance, which have been on pause for the past 3 years.

One important consideration involves the way a chaotic restart to the loan repayments may impact an institution’s Cohort Default Rate (an issue HEAG has highlighted extensively in the past, including a breakdown of key Cohort Default Rate Q&As and a detailed explanation regarding the Draft CDR report). Now, despite recent decreases in the overall cohort default rates—which were largely due to the current pause policy—Colleges and Universities need to do everything they can to help their students prepare for the resumption of these payments, in a way that goes beyond traditional Exit Counseling strategies. To that end, here are some helpful tips and suggestions for institutions to help prepare their students:

1) Engage in proactive and diversified communications about the resumption of payments:

Universities must play an active role assisting with the information campaigns regarding the student loan repayment schedule. Having important information on file regarding a student’s permanent address and contact information can serve tremendously in disseminating this information in a timely way, especially if students have moved back home or to a new location and have failed to update both their profile AND their loan servicer’s account. These campaigns should be diversified, including physical mailers, direct automatic phone calls, electronic communications, and social media outreach, to ensure the information successfully reaches as many students as possible. This information should include: (a) the exact date when payments will resume, (b) information that encourages students to update their address and contact information with both and their assigned loan servicer, (c) information that walks students through how to find their student loan servicer’s contact information online, and (d) a brief overview on the multiple possible repayment plans that exist to help make these payments as affordable as possible. Schools could wait until FSA begins providing some of these resources, or they could proactively create some of these with their own institutional branding to assist with outreach. This will help students plan their finances accordingly and avoid any surprises.

2) Share financial wellness information and encourage students to create a budget:

Creating a budget is essential for anyone who wants to manage their finances effectively. Universities should encourage their students to engage in financial wellness concepts and share resources on how to create a budget by providing them with templates and encouraging them to seek help from trusted financial advisors if needed. By providing this information directly, colleges can start getting students to begin thinking about the way loan payments should be calculated as a part of a student’s recurring expenses.

3) Offer loan repayment assistance via capital campaigns for students who may not qualify for PSLF:

By engaging one’s alumni and advancement communities, some Universities are starting to offer targeted loan repayment assistance programs to their students, particularly in cases where they are engaged in social impact work that does not meet the federal Public Service Student Loan forgiveness criteria. These programs can be targetter to match an institutional value in a mission-driven way.

4) Connect recent graduates with older alumni to develop networks of support and mentorship:

Alumni who have experience going through the loan repayment process can be a great resource for recent graduates in order to provide support and assistance. Universities can communicate with their alumni network and ask them to share their experiences regarding the management of their student loan payments, in a way that assists students in building community and a sense of collective support for those within the institution. In effect, this can also help recent graduates learn from the experiences of their peers and prepare for the resumption of payments in a way that bolsters participation via personal engagement.

5) Provide mental health resources:

The resumption of student loan payments can cause stress and anxiety for many students. Universities should provide in their outreach information about mental health resources such as counseling services, support groups, and workshops to help students manage their stress and anxiety, particularly around this specific topic.

Overall, colleges and universities have an opportunity to play an active role preparing their students for the resumption of student loan payments. This is important as we consider the many ways student loan defaults impact their institutional eligibility to participate in aid programs. As always, if you have questions about this issue, require assistance implementing a robust exit counseling strategy, or have other regulatory requirement concerns, email to connect with one of our compliance experts.