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Scaring People Into Making Good Financial Choices

How accountability affects the decision making process.

Photo of Brian Renke
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There is growing concern about the "Student Loan Bubble" forming that could be the next big financial crisis. Higher education is becoming almost impossible for most people to afford, driving more to borrow. Nationwide, student loans total more that $1.2 trillion. Teaming up with the federal government, one of Florida's largest community colleges is trying to reduce the amount of debt its students take on.

To get a student loan at Broward College, you first have to sit through a two-hour financial lesson with Kent Dunston. Dunston is in charge of monitoring student loan defaults for Broward College, with a student population of more than 60,000.

The approach is a little like Scared Straight, the 1978 documentary designed to try and keep kids out of prison, except Dunston's lesson is attempting to scare students into making good financial choices. You're not going to borrow more than the amount of money you need to attend, Dunston tells the students. "You'll be offered more. You don't need it."

"We want to assure ourselves that they understand what the hooks are on the back end of these programs," Dunston explains.

Broward introduced this class six years ago; just one effort aimed at preventing students from taking on so much debt that they default on their loans. Starting in 2014, the school began trying something else: barring students from borrowing more than they need.

Broward, along with 28 other community, four-year and online colleges around the country, is trying the subsidized-loan-only approach as part of an experiment with the federal government to cut down on student debt. (The federal government pays that interest on subsidized loans while a student is enrolled).

Schools are now also being held accountable, facing punishment—even closure—by the federal government if the student body default rate is too high.

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Photo of Victoria Dzindzichashvili

Thank you for sharing! It's critically important to teach students to borrow responsibly.

Many students/applicants are also not aware of the (sometimes huge) differences between "sticker price" and actual cost of attendance at many schools. In some cases, generous aid packages offset higher tuition to the point that it is less expensive than attending a state school. Unfortunately, students in resource-strapped public schools rarely get the counseling and support they need to intelligently navigate their higher education options. This kind of advising is becoming harder to find in urban public schools; but it's those students who are most in need of help.

How can the community come together to help students become more informed consumers of education, and take advantage of the opportunities available to them?

Photo of Shane Zhao

Great How Might We question Victoria! I work with a local mentorship program here in SF and this was the topic that came up during a recent financial literacy workshop. Lower tuition schools may seem cheaper at first glance but they lack the sources to guide students through college - many students take longer to graduate and end up paying more for their education. It was important for our mentees to understand this before they decide on where they can afford to gain a higher education.

Brian, you might be interested in joining in on a similar topic of conversation that we've been having here!: https://openideo.com/challenge/financial-empowerment-challenge/research/sofi-marketplace-lending

Photo of Victoria Dzindzichashvili

Thanks, Shane! If there was a way to organize gatherings/workshops within the community by encouraging or offering incentives to those who could contribute valuable knowledge, I think it would help.