A recent study1 found that 98% of high school graduates and their parents feel they will need financial aid in order to afford college.

Another analysis from NerdWallet2 found that the average 2021 high school graduate should expect to borrow $38,147 for public colleges and even more for private ones. 

The overall student loan debt numbers3 show that 43.4 million Americans owe $1.749 trillion in student loans and that even after 20 years4, almost half (48.9%) of borrowers still owe $20,000.

What this means for higher education institutions is that students need help understanding financial aid and all aspects of student loans.

Those who don’t understand may graduate from college drowning in student loan debt. 

Providing Financial Wellness

One of the biggest reasons graduates walk away from college with too much debt and a high likelihood of default is that they don’t understand their loans.

A College Ave Student Loans survey5 found that only 37% of borrowers understood their loan terms and 69% didn’t know how much their payments would be. 

That’s where offering a financial wellness program to your students comes in.

A FINRA study6 found that students who participated in financial education were less likely to be delinquent and default on their loans, had better overall financial management and credit scores, and had lower financial stress.

This is good news for colleges and universities because it all leads to improved academic performance and higher graduation rates.

Here are four ways a financial wellness program will help your students avoid drowning in student loan debt.

#1: Understand the Ins and Outs of FAFSA

The Free Application for Federal Student Aid (FAFSA) is an important form for college students and should be filled out yearly.

However, one in five students don’t plan to fill out FAFSA, and 85% don’t realize all that FAFSA can do to help them find the money needed to pay for tuition7. 

Although the FAFSA is used to determine student loan eligibility, FAFSA also helps students with:

  • Grants
  • Scholarships
  • Work-study programs

A holistic financial wellness program will teach students about FAFSA.

It will guide them on how to fill out the form, provide them with due dates to improve their chances of qualifying for financial aid, and even teach them how to appeal decisions if their financial situation changes. 

#2: Find Scholarships

The cost of education is stressful. Student Loan Hero found that almost 6 out of 10 students have cried over the financial stress.

A whopping 47% have considered dropping out of school.

That’s why it's so important for students to know the many financial options available.

A financial wellness program, like iGrad, will help students find scholarships and financial aid, including:

  • FAFSA scholarships
  • Their school’s financial aid
  • Community organizations
  • Local businesses
  • Scholarship databases

#3: Understand How Much to Borrow

More than two out of five students believe that they must accept all the student loans offered to them.

They don’t realize that the financial aid award letter simply details how much aid they are eligible for – not how much they have to take. 

A strong financial wellness program can help students learn that they should only take on the minimum amount of debt they need.

Tools and calculators can give students insight into how much money they will make in their intended field, what repayment amounts will be, and how much debt makes sense. 

One great tool for this is student debt letters, read more about them here: How To Increase Impact of Student Loan Debt Letters

For student’s also borrowing for living expenses, a financial wellness program will teach them how to budget and reduce costs.

Doing so will minimize the loan amount needed to graduate.

#4: Learn About Repayment Now

A recent Everfi survey8 found that 35% of those with loans did not intend to pay them back fully or on time.

In many instances, understanding repayment options can help students avoid defaulting on their student loans or accruing needless interest.

Financial wellness plans can teach students about:

  • Traditional 10-year repayment
  • Income-driven repayment
  • Extended repayment
  • Refinancing
  • Student loan forgiveness plans

Financial wellness programs can also help students learn to deal with their personal finances and stressors, offering them a strong financial foundation.

Lessons in budgeting, planning, saving, and debt reduction will help them make appropriate financial decisions, including taking on appropriate levels of student loan debt.

Take a look at our survey results showing how important financial wellness programs are and how they can help lower student loan borrowing.

 

1 - https://www.princetonreview.com/college-rankings/college-hopes-worries

2 - https://www.nasdaq.com/articles/college-bound-grads-could-exit-with-%2438k-student-loan-debt-2021-05-04 

3 - https://educationdata.org/student-loan-debt-statistics

4 - https://educationdata.org 

5 - https://www.collegeavestudentloans.com/press/college-ave-student-loans-survey-finds-only-half-of-college-students-that-borrow-student-loans-feel-confident-they-can-repay/ 

6 - https://www.finra.org/media-center/news-releases/2015/finra-foundation-funded-study-documents-effectiveness-state-financial 

7 - https://studentloanhero.com/featured/college-students-dont-know-fafsa/

8 - https://everfi.com/wp-content/uploads/2019/05/MoneyMatters-2019.pdf