ONE LETTER – BIG RESULTS This is a TEMPLATE and can be changed. Template is simply a starting guide to include the Fall Conference’s color scheme and logo. Presented by: Andrew harvey

STUDENT BORROWING Studies have shown that many students, some as young as 17 when they first borrow, fail to understand loan terms and find themselves in financial straits when they are expected to begin repaying years later. A Federal Reserve Bank of New York report found that fewer than half of survey respondents with student debt had high “loan literacy.” Federal law requires colleges to provide counseling to borrowers only at the beginning and end of their studies. Some students may not know they’re borrowing at all. Researchers at the Brookings Institution dug into federal survey data in 2014 and found that over a quarter of first-year college students with federal student loans didn’t know their loans came from the federal government. About half of those students had no idea they were borrowing money to pay for college. Students can be confused for a number of reasons. Their parents may be handling the financial aid details, for example.

A little history…. A simple letter from Indiana University led its students to reduce borrowing by far more than the national average. Amid the furor over the $1.2 trillion in U.S. student debt, the seven-campus system decided to tell students annually before they take out loans for the next year what their monthly payment would be after graduation. Federal undergraduate Stafford loan disbursements at the public university dropped 11 percent, or $31 million, in the nine-month period that ended March 31, according to Department of Education data. That’s more than fivefold the 2 percent decline in outlays to four- year public schools nationally.

“We are having more contact with the student where they can say, ‘I don’t want this,’ or ‘I want less,’” said Jim Kennedy, associate vice president and director of financial aid at the Indiana system. “If they know at all times their debt and the repayment, it helps with a lot of planning.”

So it begins… The letters, which Indiana began sending in the 2012-13 academic year, are part of an effort to expand students’ financial-aid literacy. The schools, which have a combined 95,000 undergraduates, also started a personal finance course and peer-to-peer advising and added information to the website. The letters are sent out mostly by email before students take loans for the next year, Kennedy said. By the 2012-13 school year, all seven campuses also began requiring that returning students confirm they want to take out loans on their school’s website, rather than just passively by filling out an online federal form for student financial aid. Indiana’s undergraduate Stafford loan disbursements dropped 8 percent that year. Students have to step back and really understand how much loan debt they’re taking on.

What if lowering student debt was as easy as sending students a letter? Indiana University officials say borrowing by undergraduates at the school has dropped 18 percent since 2012. That’s when the university began sending students annual letters that estimate their total loan debt and future monthly payments, as part of a push to boost their financial literacy. A growing number of students need to borrow — and borrow heavily — to finance their college educations. And giving them more information about their debt may help change their borrowing habits. Research suggests that students say no to loans when they’re told how much they’re borrowing and how loans could weigh on them in the future.

Is there a downside to borrowing less? In some cases, borrowing less may make it harder for students to graduate. They might have to spend more time working and less time studying. Or they might opt for less expensive institutions that do less to guide them.

The movement comes to Maryland HB0509 (CH0658) Higher Education – Student Loan Notification Letter was signed into law May 25,2017. Bill requiring institutions of higher education that receive State funds to provide specified information to students regarding their education loans; requiring the education loan information to be provided annually with a specified notice; providing that the information may be included in a student's financial aid award notice; providing that specified information may include a specified statement; prohibiting an institution of higher education from incurring a specified liability, under specified circumstances; etc.

What DOES the bill say? EACH UNDERGRADUATE STUDENT ENROLLED IN THE INSTITUTION WHO APPLIES FOR FEDERAL STUDENT AID IN THE APPLICABLE AWARD YEAR: (1) THE INFORMATION REPORTED ON THE STUDENT’S STUDENT AID REPORT ISSUED BY THE U.S. DEPARTMENT OF EDUCATION FROM THE MOST RECENT AWARD YEAR, INCLUDING: (I) THE TOTAL AMOUNT OF OUTSTANDING LOANS; AND (II) THE MONTHLY PAYMENT AMOUNT FOR A 10–YEAR PERIOD FOR EVERY $1,000 OWED BY THE BORROWER; (2) THE LIFETIME LOAN LIMIT FOR UNDERGRADUATE STUDENT BORROWERS; (3) A STATEMENT THAT THE ACTUAL REPAYMENT AMOUNT IS DEPENDENT ON THE FOLLOWING FACTORS: (I) THE TOTAL AMOUNT A STUDENT BORROWS; (II) THE INTEREST RATE AT THE TIME THE FUNDS ARE BORROWED & THE AMOUNT OF INTEREST THAT ACCRUES OVER THE COURSE OF THE LOAN; (III) THE LENGTH OF THE REPAYMENT TERM OF THE LOAN; AND (IV) THE DECISIONS A STUDENT MAKES RELATING TO: 1. INCOME–BASED REPAYMENT PLANS; 2. DEFERMENTS; AND 3. LOAN FORGIVENESS; (4) A LINK TO THE NATIONAL STUDENT LOAN DATA SYSTEM FOR STUDENTS WEB SITE AND AN INCOME–DRIVEN REPAYMENT PLAN WEB SITE; AND (5) THE ADDRESS OF THE FINANCIAL AID OFFICE WHERE THE STUDENT MAY SEEK FINANCIAL AID COUNSELING. AN INSTITUTION OF HIGHER EDUCATION SHALL PROVIDE THE INFORMATION REQUIRED TO STUDENTS ANNUALLY

Success of the Debt Letter

Although IU officials think financial literacy makes a difference, they haven’t actually proven that the letters — or any other initiative — drove borrowing down. Although IU officials think financial literacy makes a difference, they haven’t actually proven that the letters — or any other initiative — drove borrowing down.

An example Natalie is in her final year in nursing, said that after receiving her debt letter she decided to search for more scholarships. “When you take out loans for the year, you just see a smaller number than the grand total. Seeing the letter definitely put things into perspective.” She said she has taken out about $22,600, plans to borrow less for this year and will use earnings from a summer hospital job to help cover costs. Natalie, 22 year old nursing student

Garrett…an Example

Questions? Andrew Harvey Garrett College Assistant Director of Financial Aid for Technical Service 301.387.3025 Andrew.Harvey@garrettcollege.edu