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2011 May 16 - 12:00 am

TRACKING TRENDS : Loan Recipients Being Required To Show Plans for Repayment

RICHMOND, Va. (AP) — A Virginia community college plans to require students to submit budgets detailing how they’ll repay their federal financial aid before releasing their loans, a new step to help connect the dots between borrowing and repayment.

Starting this fall, Tidewater Community College will require borrowers to submit repayment plans and budget worksheets as a condition of the existing federal student-loan process. Financial-aid officials will require them to provide estimates of monthly payments, projected salaries based on the careers they plan to pursue, and their borrowing history from TCC or other colleges or universities.

Financial aid director Jennifer Harpham said that students receiving loans all must undergo the new steps, but she stressed that the college won’t deny loans based on the information submitted or how complete it is.

“It’s part of counseling, and we want them to take them seriously and go through it” to determine what they consider a reasonable amount to borrow, based on their personal financial situations and projections.

According to the College Board, students nationwide are increasingly relying on financial aid to pay for college as they continue to face rising tuition as their families’ incomes have declined or remained stagnant. The nonprofit group said 35 percent of undergraduate students took out federal Stafford Loans during the 2009-10 academic year, up from 28 percent in 2004-05, and 23 percent in 1999-2000.

TCC President Deborah DiCroce says the 46,000-student community college, spread over four campuses, wants to take greater responsibility for helping students better understand the financial-aid process up front. She noted that educational borrowing doesn’t resemble car loans or mortgages, which require purchasers to make more immediate payments.

“There has always been a little bit of disconnect between borrowing money and the obligation of repayment that comes up years later,” DiCroce said.

The National Association of Student Financial Aid Administrators says Tidewater’s additional steps reflect a larger trend to encourage responsible borrowing among students. It is an effort to prevent them from taking on unnecessary debt at a time when colleges are seeing higher enrollment, increased average student debt levels and growing student-loan default rates, especially among students at two-year schools.

“Once Tidewater gets this implemented, we won’t be surprised to see other institutions do the same — making sure students have a clear understanding of their total debt load,” association spokesman Haley Chitty said.

TCC says 7,880 students received $31.4 million in federal loans in 2009-10, the most recent figures available. The average one-year loan amount was $3,990. School officials estimate that 8,000 TCC students are receiving $34 million in loans in the current academic year.

At a time when college completion has become increasingly important in the global economy, encouraging financial-aid literacy can motivate students to get their degrees because their loans represents an investment in their future.

“If you’re going to make the investment, you’d better complete it with degree in hand,” DiCroce said.

The new steps supplement current federal requirements, including online entrance counseling and completion of a promissory note with the U.S. Department of Education.

Reason Chandler of Virginia Beach is among the estimated 17 percent of TCC students receiving federal education loans. He said he welcomes the chance to list a breakdown of his finances before getting his $3,500 loan for 2011-12.

The 25-year-old Chandler, who’s attending TCC after serving four years in the Navy, thinks the exercise will be useful to help him map out what he’ll do after getting his associate’s degree next spring. He plans to transfer to Virginia Commonwealth University to study human resources management to build on his former Navy job.

Though he can’t predict whether his classmates will appreciate filling out extra forms, “a few of them can use direction with their finances and personal life,” he said. While it might be a rude awakening for new students who have had their parents do everything for them, he said, it’s better to face facts now than later.

“They can get a hold of their finances before they turn 25, 30, or 40,” he said. “It makes them more mindful and accountable for their own financial situations.”

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