Last month, a group of six senators introduced a bill designed to help prevent unnecessary student loan debt by encouraging greater transparency. The “Know Before You Owe Act” would, among other features, require colleges to counsel students on financial aid before they agree to expensive student loans.
And with good reason. The obligations of some 43 million student borrowers now exceed $1.3 trillion, having long ago surpassed credit card debt as the country’s second biggest source of personal debt. It’s a challenge that stems from the rising cost of higher education, but it’s exacerbated by the complexity of an aid system that puts a heavy burden on financial aid staff and can leave students and families guessing about the real cost of college.
Research suggests that one in five student-loan holders does not understand the terms of his or her loan, and about half of students can’t accurately identify the cost of their first year of college within $5,000. Brookings estimates that more than half of first-year students seriously underestimate how much they actually borrowed. And that lack of understanding can lead to overborrowing at critical points in a student’s higher-ed journey.
But as policy makers wrestle with the politics of reform, a growing number of institutions are tapping the potential of technology to create a process that’s more intuitive and transparent. They’re taking steps to help students make better-informed decisions and drive down borrowing. Here’s how these institutions are using technology to help students borrow less.
1. AI and machine learning automate drudgery
Important but monotonous tasks like chasing students down for financial-aid documents or sending and processing countless forms mean financial aid officials spend much of their time on routine, behind-the-scenes work. That means less time for important one-on-one conversations about the aid process.
Many of the more mundane tasks can be automated with the advent of natural language processing, artificial intelligence, and machine learning. Responding to routine student questions, for example, can be automated through the use of artificially intelligent chatbots. Such chatbots are already in use at Georgia State and Arizona State universities. The technology is meeting a real need: Georgia State University’s chatbot, “Pounce,” answered more than 200,000 questions during a three-month period.
AI won’t replace the critical interpersonal connections, but with digital support for routine inquiries, administrators have more time to invest in personalized counseling and advising. They can deploy time and tools to help students discover grants and scholarships.
2. Going mobile streamlines the process
Helping students make informed decisions begins with giving them the right information at the right time, and in the right format. For today’s students, that means their phones and other mobile devices. Today’s students spend four hours a day on their mobile devices, and more than three-quarters of students say they would like to receive relevant information from their colleges through text messages.
Last year, the U.S. Department of Education signaled its understanding of the importance of mobile as well, announcing that the FAFSA will soon be available as a mobile application. But a growing number of institutions are already using mobile apps to make student financial services more accessible, intuitive, and transparent; communicating with students via a quick text message, video message, or live chat; and helping students engage with advisors on their own time, in ways that are targeted for their needs.
Savvy institutions are also using technology pioneered by banks to enable mobile deposits and mobile document upload to make it easier to send payment and documents. The financial aid office at the University of California Santa Barbara uses CampusLogic StudentForms to facilitate mobile document-upload, e-signature, and text-message reminders to replace traditional paper forms, long lag times for sending and receiving sensitive documents through the mail, and daily calls from concerned students and parents.
Going mobile accelerates the verification process and reduces access barriers like “verification melt,” which can have profound economic and equity implications for institutions and students alike.
3. Digitizing the award letter saves time
Financial aid offices use the award letter to provide students and their families with information about the composition of the financial aid package, the cost of attendance, and the institution’s financial aid policies and procedures. But many award letters suffer from antiquated design and time-consuming production, providing students with too much information to be useful or not enough to enable better decision making.
Technology can transform—and translate—aid into terms that students and parents understand.
Ivy Tech, Indiana’s statewide community college system, revamped its award-letter system for a new generation of learners. The new approach is digital, mobile friendly, and interactive, with direct links to important information and embedded videos. Best of all, the letters are personalized.
Neumann University in Pennsylvania has also developed a digital, interactive award letter, aimed at bringing families better transparency around college costs. The university believes they’ve cut the time spent on developing and sending award letters by at least 50 percent. They’ve also reduced the call volume about basic questions because the new letter is much more informative.
In the coming years, the transformation of student financial services will play a powerful role in making critical processes less cumbersome and more intuitive for students. But those shifts don’t have to wait for changes in public policy. Colleges and universities are already using technology to help students make better informed decisions and take the first steps toward borrowing less.