College and University Blog

Student Loan Information: Understand Before You Borrow

For-profit colleges that provide students with false claims and incomplete information about student loans have been making headlines and causing lobbyists to beg for higher education reform.

At the opposite end of the spectrum, a two-year Virginia school is in the news for its latest policy.

Budget Worksheets Required Prior to Taking Out Student Loans

Beginning in fall 2011, Tidewater Community College students that want the school to certify their eligibility for student loans must complete personal budget worksheets that outline a “realistic picture of their financial situation” both before and after graduation. Students will also have to create a student loan repayment plan that estimates how their monthly payments will fit into those budgets, reports Inside Higher Ed.

Although the school hasn’t experienced huge problems with student loan default in the past (during the last academic year, Tidewater’s average one-year loan debt was $3,990 and its official cohort default rate, or percentage of borrowers who enter the repayment phase and default before the end of the next fiscal year, was just 7.6 percent for 2008) Tidewater’s president, Deborah DiCroce, felt that the college could do more to help its students “borrow responsibly” and make “sound investments” in their education.

Student Loan Debt on the Rise

“The difference for what we do in financial aid and someone taking on a mortgage is that, with the mortgage, you’re immediately putting it into your budget, ensuring that you can make a payment," DiCroce told The Chronicle of Higher Education. “That’s not exactly the case with financial aid.”

As the CBS program The Early Show pointed out on its website on April 18, 2011, student loan debt has now outpaced credit card debt in the United States. In fact, it’s likely to reach the $1 trillion mark this year.

Far too many students borrow cash for college without thinking twice, assuming that they will easily land a job that covers their student loan payments after graduation, and Tidewater will be attempting to help students understand that information before it’s too late.

As Inside Higher Ed explains, when Tidewater’s financial aid office receives a student direct loan request next fall, it will prepare a student loan repayment plan for each application. The plan will include a summary of the student’s borrowing history at Tidewater as well as at other colleges, and it will estimate a monthly payment based on the student’s existing debt and new loan request. The plan will outline the obligations of loan repayment and demand that students acknowledgment of them.

Budget Worksheets Considered Part of Entrance Counseling

Students will then fill out two different budget worksheets. One worksheet asks students to estimate their current monthly expenses—such as rent, insurance, transportation and childcare—as well as their monthly income. The worksheet will help the student calculate his or her remaining discretionary funds, and Tidewater officials hope that students will consider how their estimated student loan payments could fit into their current budgets if they left college. The second worksheet requires students to fill out a similar budget that estimates their financial situation after graduation. That worksheet includes resources such as average starting salaries in specific fields to help students calculative their potential post-graduation earnings.

Jennifer Harpham, Tidewater’s director of central financial aid, explained to Inside Higher Ed that the federal government mandates that a college does not have a right to deny someone a student loan unless the student tells the college that he or she has no intention to repay the loan. The federal government also requires that students complete entrance counseling, a process determined by each college.

Tidewater considers their new budgeting program part of its entrance counseling. There may be some angry Tidewater students this fall, but school officials say that they are in fact prepared to deny student loan requests and loan renewals if students do not complete the new program.

The yet-to-launch program already has its critics. On April 14, The Washington Monthly’s Daniel Luzer blogged that “Since it’s not your money, Tidewater Community College, you can’t make students do special things to access it.” He also offered another bit of advice to Tidewater, writing that “The best way for people to properly manage their finances is for them to have less debt. If you’re so worried about helping students make sound investments in their education, charge less.”


Melissa Rhone+

Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.