Since inauguration, Americans have been sitting with bated breath to see what President Joe Biden’s next move will be regarding student loan debt forgiveness. As of 2021, there are more than 44 million Americans in more than $1.71 trillion of student loan debt.
Recently, the Department of Education approved $500 million in total loan forgiveness for the 18,000 students affected by ITT Educational Services scam, and it reignited the conversation on not just student loan forgiveness, but how consumers approach the cost of college overall. With college being one of the largest investments made in a person’s lifetime, the process to secure financial aid and a manageable loan and repayment plan have become increasingly more complicated.
Every day, borrowers continue to be overwhelmed on the topic of student loan forgiveness, and college-bound families are at a loss on where to start in the financial aid process. Banking and payments professionals can better serve these families by understanding how the process works behind the scenes, and where the points of inflection occur. Ensuring your clients are also well educated and planning ahead will lead to optimal success for those expanding into college payment services.
College is a business, and high-pressure sales tactics aren’t unique to ITT
While most colleges are non-profit entities, many of these institutions essentially operate like billion-dollar corporations that don’t pay taxes. When tuition prices rise, it benefits not only colleges/universities, but Wall Street as well.
Though we like to think colleges serve as an entity to educate and prepare students for their careers, they are businesses designed to make money. The biggest difference between private schools like ITT and “traditional” colleges is that one pays taxes (for profit) while the others do not (non-profit). While not all schools are just focused on money, many colleges have high pressure sales and marketing tactics that are not much different from ITT’s. Oftentimes, their graduation rates and job placements are not much better either. When families are considering colleges, many are not considering which schools are the most cost effective because they’re leaning into the sales pitch from the school. Looking at location, the degree that will be pursued, and the total cost after the four years are complete will help break through the marketing facade and enable families with college-bound students to choose the best fit.
Biden’s plan for widespread student loan forgiveness? Let’s not hold our breath
In April, the White House released a press release on the American Families Plan, and shared details on $300 billion in financial support for higher ed, but failed to address the $1.8 trillion in debt relief many borrowers had been waiting for. The omission of these details is the tell-tale sign that student debt forgiveness of any kind is likely not happening, and the White House has done a great job at burying the news.
While hashtags like #CancelStudetLoans is popular on social media, it isn’t as popular of a topic in Congress. With Democrats and Republicans at opposition, no headway has been made in the form of legislation. With many families having unrealistic expectations that student loan debt will be completely forgiven, it can lead to choosing the wrong financial aid packages and student loan terms. Preparing families for the more realistic expectations around college costs and the fact that Government assistance is not going to arrive, will allow finance professionals to ensure better decision-making takes place in navigating the roadmap to pay for college.
A better way forward is with proper planning + guidance is key
When it comes to paying for college, students, families, and the finance professionals assisting should focus on four key areas of success. This includes identifying the right college for the lowest cost, which requires looking at where families can maximize their financial aid packages and who is handing out the most money for your student.
Next, ensuring FAFSA & CSS/PROFILE are completed on time and all information is correct. The U.S. Department of Education reports 28% of postsecondary students do not complete the FAFSA, and roughly 45 million Americans collectively owe $1.7 trillion in student loan debt. While this number is alarming, there is the opportunity for financial experts to step in and offer guidance needed to complete FAFSA applications and receive the necessary funding to attend a four year institution.
The third focus area is negotiation. Many students and families don’t know they can negotiate with their top school to decide on a financial aid package that best suits their family and financial needs. And lastly, paying/borrowing, educates students and families to know when to use resources & how to borrow at the lowest rate.
Now more than ever, finance professionals have the opportunity to better serve families going through the college application process to ensure success, rather than mounting unmanageable debt that many are experiencing now post-graduation. Approaching the process with understanding these colleges operate like a business and no Government forgiveness will be planned for the future, payment professionals can guide families to success through each part of the process – from choosing a college, completing the financial aid process, negotiations, and student loan selections.
Matthew Carpenter is the founder of The College Aid Pro™, a software application that shows every family their affordable path to college.