Federal Student Aid Conference Focuses on the Increasing National Student Debt
Officials from the U.S. Department of Education warned of the ballooning federal student loan portfolio and provided updates on “Next Gen” programs intended to help students with the financial aid process.
Addressing the increasing national student loan debt was a central theme during the 2018 Federal Student Aid (FSA) Training Conference held in Atlanta last November. During her keynote address, the U.S. Secretary of Education emphasized the increasing student loan portfolio—currently $1.5 trillion— driven by individual student borrowers taking on larger amounts of debt and challenges to repayment. Most community college students take on relatively small levels of debt, if they borrow at all. Nationally, only 13% of community college students borrow to cover their educational expenses and their average debt is approximately $5,000. Community college borrowers have smaller debt balances; however, many face challenges to repaying their loans. The most recent data from fiscal year 2015 shows that approximately 17% of community college borrowers defaulted within three years of entering repayment (a share that has been decreasing but remains higher than other sectors).
Borrowers report several barriers to loan repayment
During the conference, department officials provided data on several issues facing borrowers that can impact their likelihood of default. According to the department’s own survey, the top issues borrowers face to repaying their loans include:
1) Insufficient information to select repayment options, apply, and re-certify when necessary;
2) Difficulty making payments;
3) Unsure of how to avoid or get out of delinquency or default;
4) Trouble resolving issues on their account; and
5) Receiving unclear, inaccurate, or inconsistent information from their servicer.
“Next Gen” aims to help students apply for financial aid and repay their loans
In 2017, the department first announced their plans for the “Next Generation Financial Services Environment” (Next Gen) which includes plans for several new initiatives aimed to help students with the financial aid application process and student loan repayment. Of the planned Next Gen initiatives, the only component that has launched for the public is the myStudentAid mobile app. Using the app, students can fill out the Free Application for Federal Student Aid (FAFSA). According to the department, approximately 375,000 FAFSAs have been submitted so far using a mobile device.
Using the app, students can access information from the College Scorecard to help them make decisions about where to attend college and compare information such as graduation rates and average earnings. Students can also keep track of their financial aid, including their cumulative loan balance. Eventually, the department plans to expand functionality for students to repay their loans through the app, regardless of their loan servicer.
Furthermore, the department provided updates on the payment vehicle account pilot program. Under the pilot, students at participating colleges will have their federal aid disbursed directly to a debit card provided by a third-party financial institution and co-branded with FSA. The account will be free to students and can help increase access to banking. However, many higher education stakeholders have raised concerns about potential marketing abuses by the chosen financial institution and new student spending data that could be used as justification to limit financial aid programs.
Allison Beer is the Senior Policy Analyst for ACCT. She can be reached at email@example.com.
 Author’s analysis of 2016 National Postsecondary Student Aid Study (NPSAS)