Responsible Borrowing UASFAA Conference MARCH 2019 Presented by Jessica Terry and Vanessa Martineau AUTHOR’S NAME HERE

AGENDA The Problem WGU Background RBI Experimental Site Recommended Amounts Student Loan Scenario Calculator Results So Far Next Steps Award Letter Recommendations Group Participation Questions

The problem – a.k.a. Why does this matter? Federal student debt now exceeds $1.4 trillion More than 1 million student borrowers default each year Nearly 40% are expected to default by 2023 48% of student borrowers either didn’t know or incorrectly estimated the amount they have borrowed 52% of borrowers are unaware that interest accrues while in school As Financial Aid Administrators, what can we do to ensure that our students are informed, responsible borrowers?

Western governors university Non-profit, founded in 1997 113,000+ full-time students in all 50 states, and 133,000+ graduates to date 60+ degrees in 4 colleges for high-demand fields Competency-Based Education Completely online Academic Year is two consecutive 6-month terms ~$7,000 per year, “all you can learn” Low Cost of Attendance

Western governors university The Average WGU Student: Prior college experience Existing student loan debt Needs: Flexibility Access Affordability Ability to leverage knowledge and skills already acquired Opportunity to advance career, not just begin or change WGU is committed to fostering a culture of responsible borrowing through a variety of innovative initiatives.

Responsible borrowing initiative (RBI) – experimental site Started January 2013 U.S. Department of Education study to limit borrowing for certain WGU students Target population is students entering WGU with significant prior debt Effectively limits borrowing to direct costs (Tuition & Fees) $30,000 Outstanding Principal Balance (Avg. OPB: $43K) Limited to $7,500 per Academic Year Undergrad Student $40,000 Outstanding Principal Balance (Avg. OPB: $62K) Limited to $8,500 per Academic Year Graduate Student

Recommended amounts Introduced at WGU in July 2013 Select My FA Plan Maximum eligibility is displayed Students are encouraged to accept “Recommended Amounts” Recommended Amounts cover only Tuition and Fees (no excess funds) Tough transition, particularly for continuing students Retrain and adjust expectations

Recommended amounts

Recommended amounts

Recommended amounts Do you want to be awarded federal student loans?

Student loan scenario calculator Provides students with full visibility of their total student loan debt – including prior college debt and projected debt at graduation from WGU Includes estimated monthly payments in standard repayment terms Shows the financial impact of program acceleration Presented at key moment of decision-making Using technology to “gamify” the financial aid decision-making process Allows students to take a more active role in their financial aid

Student loan scenario calculator

Student loan scenario calculator RECOMMENDED AMOUNT MAXIMUM AMOUNT

Student loan scenario calculator 12 CUS PER TERM – 9 TERMS TO GRADUATION 20 CUS PER TERM – 6 TERMS TO GRADUATION

Average borrowing per student decreased 40% Results so far Average borrowing per student decreased 40% Average Borrower Indebtedness (ABI) declining Calculated for undergraduates graduating between July and June for the corresponding award year AY 2018 = $15,374

Results so far From July 2013 – June 2018, average borrowing per student went from $7,870 per year to ~$4,640 per year Loan repayment rate (principal reduction within 3 years) WGU = 54% (from College Scorecard) Cohort Default Rates (CDR – 3 year) trending down WGU rate less than half the national average (11.3%) FY2011 = 6.6% FY2012 = 5.0% FY2013 = 4.8% FY2014 = 4.6% FY2015 = 4.1% WGU rate lower than national average of every 4yrs(+) segment Private, For-Profit = 14.3% Public = 7.1% Private, Nonprofit = 6.6%

WGU Responsible Borrowing – Next steps Scholarships Scholarship search engine to be made widely available, particularly during key decision-making times Payment Plans More flexible out-of-pocket payment options while enrolled to reduce reliance on student loans Student Loan Scenario Calculator Enhancements Add an out-of-pocket payment plan to the calculator Financial Wellness Offer more financial literacy/wellness resources and courses to enrolled students New Award Letter

Award Letter Old/Current Award Letter: New Award Letter: Compliance-oriented Does not take into account the student experience New Award Letter: Partnership with CampusLogic (3rd party servicer) More user-friendly Delivered in the form of an email with a link to a dynamic web page with their own unique Award Letter Sent after students make decisions about their funding

Award Letter Goals: Improve the student experience Break out the difference between direct and indirect costs (encouraging students to borrow only direct costs) Offer information that is specific to each student Enhance students’ self-service options Provide students with access to resources specific to their funding needs

OLD / CURRENT AWARD LETTER NEW AWARD LETTER OLD / CURRENT AWARD LETTER

recommendations Think about the student experience – increase gamification Present students with tools and information at key decision-making moments Use clear, easy-to-understand language in Award Letters and other communication with students – obscuring costs puts students at risk of dropping out, which is a major predictor of default Provide students with an easy way to opt for less than their maximum loan eligibility Show students information about the total amount they’ve borrowed and projected debt and repayment early and often Consider using .gov links in financial aid communication Don’t hesitate to get involved in a Department of Education Experimental Site

recommendations Get everyone involved! Reducing student loan debt should be an institution-wide initiative, not just a Financial Aid project Secure buy-in and investment from your institution’s central administration by connecting responsible borrowing to your existing mission and focus Partner with other departments to capitalize on existing resources Empower other student-facing staff and faculty to integrate financial wellness and responsible borrowing into their interactions with students Recognize that this is likely a long and difficult process, but the results make the effort worthwhile Even small changes can have a big impact!

Share with the group what your institution is doing! What are you doing in your institution to encourage responsible borrowing? Share with the group what your institution is doing!

Additional information / questions Vanessa Martineau – vanessa.martineau@wgu.edu Jessica Terry – jessica.terry@wgu.edu Questions?