By Jessica Bakeman, Albany Bureau
The State University of New York on Wednesday will launch an offensive against mounting student loan debt, a first-in-the-nation initiative that will engage borrowers at every point in the process: when they take out loans, begin repayment and if they need help avoiding default.
The SUNY Board of Trustees is expected Wednesday to approve the initiative, called Smart Track, according to a news release obtained by Gannett's Albany Bureau. It will launch at six pilot campuses before going system wide in fall 2013.
Community colleges in Niagara, Schenectady and Ulster counties will participate in the pilot, as well as the SUNY colleges at Fredonia and Purchase and the University at Albany.
"Student debt is a huge issue nationally. We fall below the average student debt, but we want to make it perfectly clear to our students what the implications of attending SUNY are," said system Chancellor Nancy Zimpher at a board committee meeting, held Tuesday in New York City.
"We are working really productively with students to reduce their indebtedness once they graduate from college and accrue debts that are really impossible to repay," she continued.
Nationwide, student debt has surpassed credit card debt, standing at $914 billion as of June 30, the Federal Reserve reported last week. That's up from $363 billion in 2005.
Four-year SUNY students' average debt is about $21,000, when the national average is more than $25,000, according to state officials. About 60 percent of SUNY students take out student loans.
Community colleges have the highest default rates. Of the students at New York community colleges who took out loans, 12.7 percent of them default within two years, according to the most recent data. That's higher than the national average -- 11.9 percent.
At SUNY four-year colleges and universities, 4.8 percent of borrowers default, compared 5.2 percent nationally.
SUNY officials said the plan will aim to reduce default rates with a comprehensive approach. It will involve every campus office to retain students so they'll finish their degrees and ideally obtain gainful employment, allowing them to repay their loans.
"Student loan default on a campus is not a financial aid problem; it is an institutional problem," said Jim Trimboli, director of financial aid at Niagara County Community College, which has a 15.1 percent default rate. "Whether it's financial aid, academics, student admissions -- the whole idea is to have all departments on campus working in unison."
One piece of Smart Track is an expansion of the duties of the existing SUNY Student Loan Service Center, located at the University at Albany's Rensselaer campus. The center now works with students who have federal Perkins loans at the four-year colleges. Soon, the center will work also with students who have federal Direct loans, and the staff will start serving community colleges.
Staff at the center will work with the campuses to craft specific messages for students, communicated mostly by email, to guide them through the borrowing process. Students who are borrowing their first loans might get messages explaining why they shouldn't take out any more than they need, while students leaving school will get messages explaining how much they might expect to pay each month or what to do if they get behind.
The messages will direct students to several online resources, including a specific Smart Track Web page, which is being developed now. It will put relevant information in one place and give students a chance to chat live with financial aid officers from around the system.
Students who are deemed "at-risk" of defaulting on their loans will be "flagged" and receive special messages, such as advice on where to get academic help.
"For instance, maybe there is an issue in a particular certificate program that a college offers, (where) there is a high non-retention rate," Trimboli said. "That would maybe serve as a flag."
Campuses will use this information, compiled by SUNY and the U.S. Department of Education, for individualized outreach.
"(This) early-warning initiative will identify the cause of loan default," said Corey York, director of student financial services at SUNY Purchase, in Westchester County.
Purchase, which has a 4.6 percent default rate, "will use this data to counsel students at risk through one-on-one discussions about costs and borrowing," she said.
The loan servicing center also will contact borrowers who show difficulty repaying their debts. If borrowers' payments are past due, a staff member will try to help by educating them about their options.
"As soon as they become delinquent for 30 days, maybe it's time for an intervention," said Brian McGarvey, director of financial aid at Schenectady County Community College, which has a default rate of 11 percent. "Have someone explain the system to them and help them get back into good graces."
They might be eligible to defer their loans for six months or to spread payments over a longer period of time, which would help them avoid the long-term financial consequences of defaulting. A student loan goes into default after 270 days without payment.
"Can they save everybody? No," McGarvey said. "But if they can take a school with a default rate of maybe 15 percent and if they can reduce that to 7 or 8 percent, that's a major major improvement. And that's helping an awful lot of students."
Also, Smart Track aims to create smart, informed borrowers early on.
When prospective students consider the financial obligation of attending college, they will utilize the new SUNY award letter, which is a version of the recently developed federal financial aid shopping sheet, tailored to the state system. The form spells out the actual cost of attendance, including room and board charges and other fees. It will also inform consumers of the average debt carried by students when they leave the college and their loan default rate.
Similar to the award letter, prospective borrowers may use the online net price calculator, which SUNY launched last year, to add up individualized college costs.
"This is a very proactive approach to helping students," Trimboli said, "and that's what it's all about."