By Daniel Menefee
For Maryland Reporter
Financial aid officers across the state oppose two proposals that would require state funded colleges and universities to generate an annual “loan letter” to students that spells out their loan obligations and help them manage their finances better.
The letter would be required to include payoff amounts, cost of borrowing and monthly payments – even for loans obtained at other schools.
The bills, HB509 and HB262, were inspired by a “loan letter” program at Indiana University that reduced student borrowing by 18%, but financial aid officers in Maryland who testified at a House Appropriations Committee hearing on Tuesday said the mandates are duplicative, unnecessary and costly to administer.
“As financial aid officers we are very, very aware and concerned about student loan indebtedness,” said Jane Hickey, director of financial aid at University of Maryland Baltimore County. “[But] we are duplicating information students already get in a variety of places and operationally this will be a challenge for us.”
Hickey said students might have “four different loans with four different interest rates accruing at four different rates.”
“I don’t know how I could ever feel confident I was correctly telling a student what they owed and what they were going to repay with the software and the tools I have to work with,” Hickey said.
Community colleges impacted
The cost to generate the letter, which financial aid professionals across the state testified is a waste of time and money, could cost local community colleges $450,000 each annually and upfront costs of $200,000 for information technology upgrades, according to a legislative analysis. Additional part-time staff would be needed at each community college, it stated. All of Maryland’s 15 community colleges would be affected.
Patricia Scott, assistant vice president of student financial assistance at University of Maryland at Baltimore, said her department would have to track up to six different types of loans for graduate students in different majors that date back to the freshman year, and it would involve contacting different loan servicers.
She said UMAB already links students to the National Student Loan Data System (NSLDS), where students can see all of their federal loans. And medical students are given information for their Title 7 loans through the Bureau of Health Professions.
Scott said the student should communicate with the loan servicer because ultimately that’s who holds the loan.
“The student will not repay the institution, the student will repay the loan servicer,” Scott said. “Loan servicers are always in contact with students to let them know what they owe and the interest on the loan.”
Dawn Mosisa-Lowe, director of financial aid at Howard Community College, said duplicating information students already have is not a good use of time.
She said the time should be dedicated to making sure students are applying for scholarships before they have to borrow. She said a student’s information is readily available at the studentloan.gov website.
“It’s always there for them,” Scott said.
Del. Mike McKay, R-Allegany, asked Joann Boughman, senior vice chancellor for academic affairs at the University System of Maryland, if colleges had an extra $450,000 lying around or if cuts would have to made in other areas.
“I wish any of us had the resources lying around that might be incurred because of new processes that we would have to be in place,” Boughman replied. “Each campus would have to reassign and realign their workers.”
Patricia Scott said at the graduate school level the University of Maryland at Baltimore would have to go back into a student’s entire loan history from their freshman year and calculate interests and terms that may have changed over the course of the loans.
“A student may have paid something back to a loan servicer and we would not have access to that information,” she said. “I would actually have to have someone look at every loan a student ever had.” She said students would only get a “guestimate.”
Success in other states
But Del. Shelly Hettleman, D-Baltimore County, sponsor of HB509, said other states have seen success in reduced borrowing as a result of a having a loan letter program.
Hettleman cited a Brookings Institute study that showed 28% of students were unaware they had any federal loans; many who knew they had loans did not understand the terms and conditions.
She said the success of the loan letter program at Indiana University resulted in 18% less student borrowing and inspired the Indiana legislature to make it law for all state colleges in 2015.
“Students don’t often have an understandable format of how much student debt they are acquiring,” Hettleman testified. “This simple document…would clearly spell out to each student on an annual basis what they’re on the hook for.”
She said while financial aid offices will point to information in a student’s 10-page FASFA document, a college graduate might find it difficult to understand.
“I don’t know too many 21-year-olds who are going to be able to dig down and really figure this out,” Hettleman said. “I don’t think it’s too much to ask our institutions of higher education to be able to provide this information.”
Dan Menefee can be reached at firstname.lastname@example.org