Editorial: Students need an annual checkup on their loans

Congress is considering annual counseling for college students on their loans and how to repay them.

By The Herald Editorial Board

Our apologies, college students; we don’t mean to nag, but do you have a moment to talk about your student loans?

It’s just that collectively, all 44 million of you — whether in college or out and paying on your loans — have a record $1.52 trillion in student loan debt. That’s second in consumer debt behind only mortgages and about $620 billion more than total U.S. credit card debt. Student loan debt averages nearly $35,000 per borrower nationwide.

The average student loan borrower in the class of 2017 left school owing about $28,288, an increase from $27,975 the year previous, according to an annual report on student loan debt by LendEDU, a private company that offers private student loans and student loan refinancing.

The lender’s recent state-by-state report shows some better news for students in Washington state. The state ranks No. 6 nationally in terms of lowest student debt owed for the class of 2017, with an average of $23,359, a drop of about 3 percent from the previous year’s class, behind Utah, New Mexico, Nevada, California and Wyoming for average debt per borrower.

The report also ranks individual schools based on their average student loan debt. Western Washington University in Bellingham led the state among public colleges with an average of $15,663 in debt per borrower. And Western ranked 10th nationwide among public colleges. Locally, the University of Washington, Bothell ranked third in the state at $18,850 for average student debt last year.

Yet even debt in the low five figures is a heavy load to take on at the start of a career, especially for a young family. And students shouldn’t enter into such arrangements blindly.

Typically first time student loan borrowers do receive financial counseling at the start of college as well as exit counseling. And some colleges require their own financial aid counseling. But that advice may not be sticking with many student borrowers. About 40 percent of borrowers surveyed in 2012 had no memory of having gone through such counseling, according to NERA economic consulting.

And about 11 percent of student loans are delinquent, at least 90 days overdue.

This week Congress is expected to vote on bipartisan legislation in the House and Senate that would increase the requirement to undergo online or in-person guidance to include annual sessions in addition to the entrance and exit counseling.

The current online training, offered at StudentLoans.gov, provides an interactive tool that helps students understand their loans and the types available, how loans accrue interest over time, what level of salary to expect for a chosen career, how to budget during school and after and the consequences of default. The online training takes about 20 to 30 minutes to complete.

Increasing the frequency of that advice makes sense, especially for students who after a year or two may be considering a change in majors or a switch in schools. It may also encourage students who are considering leaving school to weigh what dropping out will mean for what they owe and how they are going to pay back that debt.

As well, the information available at exit counseling would be expanded to include a summary of each student’s outstanding loan balance, the anticipated monthly payments under standard and income-based repayment plans and options to pay accrued interest before regular payments begin.

There’s much more that can and should be done to keep student loan debt from becoming a burden. Colleen Campbell, with the Center for American Progress, told American Public Radio’s “Marketwatch Morning Report”: “What we need to be looking at is improving the technical aspects of the system, making prepayment much more straight-forward for borrowers and much more automatic.”

Campbell also is concerned that the annual counseling could backfire by overwhelming students already feeling discouraged by debt.

But that information could instead be liberating. A debt load of five to six figures can be daunting, but rather than overwhelming students, the annual reminders of their financial position and projections for the outcomes of their decisions may instead give them information that shows them whether they are on the right track or if they need to make adjustments to their plans or their spending.

A half-hour of guidance every year would be a good investment for anyone with student loans.

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