The U.S. Department of Education (ED) announced a pilot program today that will allow a limited number of institutions to require additional loan counseling for borrowers beyond the one-time entrance and one-time exit counseling as a condition of receiving a Direct Loan, and to customize counseling based on students’ needs. The goal of this pilot is to “evaluate certain innovative loan counseling practices that can prepare students to manage their college finances, inform them about their student loan repayment options, and ensure students are well-prepared to repay their loans on time.” Participating schools will be use ED’s Financial Awareness Counseling Tool, third-party counseling services or tools, or their own counseling program as part of the program.
Through this pilot, ED hopes to learn if the additional loan counseling:
- Positively influences students’ decision-making about borrowing;
- Promotes successful repayment of student loans, including reducing delinquencies and defaults; and
- Has an impact on students’ academic performance (e.g., grades and time-to-completion).
It is also interested in whether different types of content and modes of delivery of loan counseling are more or less effective in promoting the above outcomes. This experiment can inform any future policy changes around loan counseling and efforts to inform borrowers about repayment plans and progress.
An advance copy of the Federal Register notice, which will be released on Monday, provides greater detail on the design and requirements of the pilot program. Institutions will have 45 days to submit a Letter of Interest to ED at firstname.lastname@example.org once the notice is released on Monday. For more information, please see the draft notice here.