New University of Delaware program to help students navigate loans

An experimental U.S. Department of Education program hopes to help University of Delaware students better navigate the student loan system by forcing them to go through an extra counseling session before taking on additional debt during their sophomore, junior and senior years of college. 

UD is one of 51 colleges and universities selected to participate in the program, which was created to test the effectiveness of requiring loan counseling sessions beyond the traditional entrance counseling before students' freshman year and exit counseling when they graduate. 

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The entrance counseling can be completed online and takes only 20 to 30 minutes. Exit counseling, which reminds students when loan payments are due and helps calculate monthly payments, can also be completed online, in roughly the same amount of time. 

"But there's nothing the four years you're here that kind of reminds you where you're at," said Melissa Stone, director of Student Financial Services at UD. 

"When you're a freshman coming in, there's so many changes going on. Yeah, you may have to do the entrance counseling online, but you may not completely understand it at the time." 

That will change for at least some students starting this fall, she said. Students borrowing through the Federal Direct Loan Program will be randomly placed in one of two groups — those in the first will have to undergo mandatory loan counseling in the form of a brief online session each time they borrow more money, while those in the second will not. 

"Students at these institutions will receive proactive and ongoing counseling, and they will gain tools to better understand and manage their own finances," U.S. Under Secretary of Education Ted Mitchell said in a statement, adding that the experimental program will yield information about whether additional counseling improves student outcomes, including program completion and loan repayment.

Right now, the plan is to continue the experiment for several years, according to the Education Department. The program itself builds upon Obama administration investments and progress toward making college more affordable and accessible for American families. 

Student loan debt is now the second-highest consumer debt category, coming behind only mortgage debt, according to Forbes. 

Since 2007, the total student debt has nearly tripled while the number of people with loans has climbed to 44 million from 28 million. There's about $1.3 trillion in student loan debt nationwide and in 2015, nearly 70 percent of college seniors graduated with debt, up from less than half in 1993. 

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At UD, of the most recent cohort of graduates (those expected to graduate in the spring of 2015), about 42 percent graduated with student loan debt, Stone said. 

For Delaware residents, the average amount of loans taken was $20,841, Stone said. For out-of-state students, it was $23,564. 

Numbers from the Institute for College Access and Success are slightly higher, with the average debt of UD's 2015 graduates at $34,101 and the percentage of students graduating with debt about 61 percent. 

The average student loan debt in Delaware as a whole (not just at UD) was $33,849, with 65 percent of graduates with debt, according to the institute. That puts Delaware fourth in the nation for student loan debt, with a national average of $30,100 per borrower. 

Stone said there are programs in place at UD to help keep debt that students take on at a reasonable amount. 

Among them are the Blue Hens Success Collaborative and Blue Hens Success Grant Program, which help identify and help at-risk students to stay in college by offering both academic counseling and financial assistance. 

UD also has the Commitment to Delawareans, a pledge to meet the full demonstrated financial need of in-state students and to cap students' debt at one-quarter the cost of a four-year UD education. 

Students that graduate with debt in the $20,000 range should be able to make monthly payments of approximately $200 once they secure a job, Stone said. 

The new loan counseling program will build off of existing UD initiatives by offering them additional support and giving them tools to succeed both in and out of college. It could prompt students to rethink loans and look for alternative funding, Stone said. 

"Rather than borrowing, they may be able to make some smart decisions like taking advantage of work study," she said. "... Just because we offer them a loan, they can cancel it anytime. We can return it to the feds. 

"I think a lot of this is just trying to get them to understand they're part of the decision-making." 

Jess Verchick, a UD grad, said a little extra counseling could go a long way. 

"It took me 2.5 years to get a 'real job' after graduating from UD," she said on Facebook. "One thing they should discuss is the deferment and income-based repayment options so that you don't accrue additional charges. Once the career came through, I realized it made more sense to pay off the higher interest loans."

Garrett Thomas Hadley, another grad, said on Facebook, "I was given no advice, but they did explain it was my responsibility to pay them back over a 10 year period after I graduated or when I was done with school. I paid it off in 12 years because after two I refinanced to get out of the 7 percent rate." 

Contact Jessica Bies at (302) 324-2881 or jbies@delawareonline.com. Follow her on Twitter @jessicajbies.