New interactive video offers training for students borrowing to pay for their education
Most people claim student loan debt is the best type to accrue. But, as unemployment looms, school enrollment increases and loan amounts increase, so do default rates. People are beginning to question the value of a high-priced education.
The Imagine America Foundation, a career education scholarship provider and research organization, seeks to decrease the student loan default rate by educating students about responsible borrowing. In March, the Foundation released a new interactive video tutorial, "Financial Planning Made Simple (FPMS)," for career college students. Colleges that participate in the Imagine America scholarship and award programs will be required to use it as an online training tool.
The easy-to-use interactive video will allow students to choose between either a male or female avatar to walk them through a variety of important educational financial decisions. The 18-minute tutorial will discuss aspects such as budgeting, borrowing and repayment.
IAF President Robert L. Martin said, "We knew in order to get students' attention we needed to create something that would grab their attention and keep it."
The avatars are shown calculating their budgets by displaying the amount and location of their spending. The avatars also are shown meeting with a financial aid advisor. Students can follow along and learn about different terms by clicking on words linking them to further information regarding consolidation, forbearance, deferment and default. IAF tested the video and the calculator features with career college students to assess whether they found it helpful.
"Both had a very positive response to the video and calculator," Martin said. Of the students surveyed, 86 percent said the FPMS tool would definitely or very probably help them to make responsible financial decisions. When asked how helpful the tool might be to their students, 59 percent of financial aid administrators said a great deal, while the other 41 percent said very much, according to Jenny Faubert, IAF Director of Communications.
The video gives students the opportunity to calculate their own budgets by using the FPMS Student Financial Planning Tool. It allows users to visually see exactly where their money is being spent in hopes of helping students decrease overspending and increase their savings.
"The Student Financial Planning Tool is different because it includes two tabs, one to create your monthly budget and school expenses and the second tab calculates the different repayment options," said Faubert. "By watching the video and using the Student Financial Planning Tool, students can make more informed financial decisions."
While gainful employment regulation is awaiting approval, IAF is taking these proactive steps toward minimizing excessive borrowing. Potential legislation changes threaten students' ability to access much-needed funding. The IAF hopes the new tool will give students a head start on understanding the real cost of an education and will decrease the student loan defaulters. IAF understands career college students have different financial responsibilities.
"Many students attending career colleges are older adult students. In the video, the student is able to choose from two different budgeting scenarios: one, if they live with their parents who pay the rent and utilities or two, if they live on their own and pay their own rent and utilities," Faubert said.
As more and more students' loans are facing default, it's important to understand the severity of not being able to pay back loans. According to the Federal Student Aid website, once a student loan is declared in default, students are no longer able to apply for deferment or forbearance, which allows students to postpone or stop making payments for a set amount of time. Additional steps to collect the defaulted loan can impose extreme hardships for the student, such as wage garnishment, collection costs, legal action and a lowered credit rating. The financial woes of not paying back student loans could also jeopardize students' ability to obtain employment.