This guest post comes from Gregory Kienzl, principal strategist, and Michelle Croft, principal research associate, of ACT, a valued partner organization. Views expressed in guest posts are those of the authors. We thank ACT for its generous support of the 2019 National Forum on Education Policy. Be sure to visit ACT in our Ed Lounge while at the National Forum!
As a means to paying for college, financial aid is a confusing but critically necessary process for many students. Without it (and often, even with it), many students acquire loan debt — which influences college planning and enrollment decisions, post-college employment and other important life choices, such as enrolling in graduate school, buying a home or getting married.
The degree to which college-bound students understand the long-term consequences of student loan debt was the subject of a recent survey conducted by ACT and its Center for Equity in Learning last year. The results will be published later this month, but here is a sneak peek.
Of the roughly 1,200 students in grades 11 and 12 who registered to take the ACT® test in April 2018 and responded to the survey, more than two-thirds were (1) eligible for Pell Grants, (2) paying for their postsecondary education themselves or (3) averse to any college-based debt. Other national estimates, including those previously used by ACT, do not account for all three of these traits, undercounting both the number of students struggling with financial aid decisions and the reasons why they struggle.
This survey presents a more nuanced view of high school students’ needs around financial aid decisions and how best to meet them. For example, the survey found that many students lack the most up-to-date and personalized, debt-related information necessary to making college enrollment and student financial aid decisions. One way that states can address this lack of information is to incentivize colleges and universities to work with local high school counselors and nonprofit college access organizations to provide greater consistency, clarity and detail about college costs. There are many technologies and tools available to do this at scale, and ACT encourages states to explore these options. An ounce of prevention on the front end is worth a pound or more of collective savings when the first loan payments are due.
The survey also suggests a need for more specific interventions related to financial literacy. Consistent with other studies, the survey found that students often did not understand basic information about the financial aid and repayment processes, which may limit their abilities to access aid. (In their defense, the terms and long-term consequences are quite complex to grasp.) But we also found that debt-averse students may need additional information about the value of undertaking some — but not too much — debt and the effects of different types of debt and repayment options on ultimate debt load and ease of repayment.
It is vitally important to the success of any plan to redesign the student financial aid system to require high schools and colleges to do a better job of clearly explaining all options related to available student aid — preferably non-loan aid — and the long-term consequences of student loan debt. Providing students with more individualized information is a necessary step toward the goal of improving student access to financial aid — and thus postsecondary education and ultimately career opportunities.