Washington, D.C., Dec. 16, 2011—The issue of rising student debt and loan default rates not only indicate serious trouble for the nation’s borrowers, but it also forces the U.S. postsecondary education system to contend with such matters as student retention and access to federal money, namely the Pell grant. Growing student debt is of particular concern to Minority-Serving Institutions (MSIs)—which have a legacy of providing increased access to some of the nation’s most underserved students (i.e., low-income, first-generation, and minority students)—whose financial lifeline depends on federal aid. Immediate action is necessary and experts at the Institute for Higher Education Policy (IHEP) say colleges and universities, MSIs and non-MSIs alike, must be willing to look toward financial literacy practices and programs as viable solutions.
According to two new IHEP briefs being released today, Financial Literacy at Minority-Serving Institutions and Cohort Default Rates in Context, financial literacy is increasingly becoming a familiar resolution for institutions that are struggling to achieve stronger student retention and completion and eventual lower loan default rates. Exploring different types of interventions—such as faculty development, cross-departmental collaboration, mentoring, first-year experience, orientation, social media, workshops, entrance and exit counseling, and community engagement—has proven to be helpful to both students and institutions. The publications also take a closer look at the current cohort default rates, a measure of accountability that informs the government and the general public how well an institution prepares its students for loan repayment; and, they highlight survey results from a subset of MSIs that determined student success rates and loan use behavior.
“Our research found that the concern about students who do not earn a postsecondary credential being more likely to default on their loan payments than those who complete is valid and strongly connected to inadequate institutional resources, processes, and policies. In other words, those students who fail to repay their loans may do so in part because of insufficient financial literacy,” said IHEP President Michelle Asha Cooper, Ph.D. “Broader conversations related to developing and managing programs that promote stronger financial literacy levels for students at-risk of defaulting are necessary.”
Financial Literacy at Minority-Serving Institutions and Cohort Default Rates in Context were both commissioned as part of IHEP’s partnership with USA Funds—the nation’s largest student loan guarantor—and its 2011 Symposium on Financial Literacy and College Success at MSIs.
The Symposium on Financial Literacy and College Success at MSIs is an annual event that brings together representatives from Historically Black Colleges and Universities, Hispanic Serving Institutions, and Tribal Colleges and Universities to think critically about current institutional practices and how these practices relate to broader institutional goals; specifically, financial literacy and student retention. Participants include a range of senior-level leaders, such as college and university presidents, chief student affairs personnel, and financial aid representatives. The event aims to equip institutions to better meet both student and institutional financial needs, with careful consideration given to issues of accessibility, affordability, retention, and financial aid.
For more information about the Symposium on Financial Literacy and College Success at MSIs or to download a free copy of Financial Literacy at Minority-Serving Institutions and Cohort Default Rates in Context, visit IHEP’s Web site at www.ihep.org.