America’s collective student loan debt exceeded $1 trillion awhile ago and newly-minted graduates leave their alma maters with a typical debt of almost $27,000 these days. (RELATED: Average student loan debt climbs 5% for new college grads)
Here’s the hilarious part, though: 40 percent of all federal loan borrowers either don’t receive any kind of financial exit counseling — which is required by law — or have no earthly idea if they received such counseling.
The extraordinary claim is highlighted in a new book by Carol Jensen entitled College Financial Aid: Highlighting the Small Print of Student Loans.
Jensen traces the claim to Healey C. Whitsett of National Economic Research Associates and Rory O’Sullivan of Young Invincibles.
“Their discovery questions a universal understanding that college students with federal loans are mandated by law to receive counseling,” Jensen told The Daily Caller.
The counseling mandate is minimal. The U.S. Department of Education merely requires all students to undergo a cursory, 30-minute exit counseling process each time they “withdraw, graduate or drop below half-time attendance (even if you plan to transfer to another school”).”
In her book, Jensen argues that the federal exit loan counseling process is fantastically ineffective. Borrowers of vast sums of money — money they are supposed to pay back, with interest — just brazenly skip it altogether or don’t remember attending because it’s so awful and unmemorable.
She also claims that the requirement is utterly toothless because it only requires schools to notify students. No one is penalized when students don’t actually receive important information about loan repayment and default.
“The federal mandate does not allow colleges to require students to complete the exit interview that includes information on loan options and the consequences of defaulting on federal loans,” Jensen told TheDC. “Assuming students are notified, they can still receive their money, grades and transcripts without completing the exit interview.”
Additionally, the author notes, students can choose to receive the minimally required student-loan information either in an actual, in-person interview or, if they prefer, online.
“Students do not seem to comprehend or understand the online information,” Jensen claimed. “Online it is very easy not to read any of it and just click: ‘Yes, I agree,’ ‘Yes, I’ve read it,’ and go on.”
Ideally, Jensen says, students would be required to submit to one-on-one counseling. She admits, however, that most colleges and universities aren’t staffed to handle such an influx of students seeking information.
Also, it’s not clear if forcing advice on students would make a difference in the total cost of student defaults, which is currently in the neighborhood of $38 million annually.