The U.S. Department of Education's Annual Student Loan Acknowledgement (ASLA) tool was created to help borrowers better understand the impact of student loan borrowing on their financial future. It shares insight on projected student loan debt, monthly payment amounts, and salary estimates for chosen degree programs. Similar to student debt letters, many hope the data will lead to more informed decisions related to higher education financing. Does this mean student debt letters will move to the wayside? We don't think so and here's why.
Although the ASLA shares important information with borrowers, it lacks school details that can be important considerations. A customizable student debt letter includes more than just federal Direct loan information. Using it in conjunction with the ASLA is a quality pairing to provide a lot more information to put the borrower on the path to borrowing and repayment success. We've uncovered the top 10 ways a debt letter can provide optimal value alongside the ASLA. But let's first start with the ASLA basics.
Federal Direct loan borrowers will be required to complete the Annual Student Loan Acknowledgement (ASLA) prior to receiving a loan disbursement. While this requirement was set to go into effect for the 2021-22 award year, that directive was pulled back on March 8, 2021. Once implemented, the acknowledgement requirement will take place each subsequent year they receive a new federal loan. After logging in to studentaid.gov/asla/:
- First-time borrowers are presented with their repayment estimates, terms, how much they’ve borrowed, and the remaining amount available for their education. They must acknowledge the loan as debt they’re responsible to repay. They’re also provided with collegescorecard.ed.gov data on potential debt and earnings for their chosen major at their school.
- Ongoing borrowers are presented with loan and grant history and must acknowledge their new loan debt.
1. Send Any Time, To Any Student Loan Borrower
The ASLA is only available once a year for students borrowing a new federal loan. Debt letters can be sent any time, to any student loan borrower—not just those who are borrowing a federal loan in the current year. This simple act helps to keep borrowers informed throughout their college journey, not just when they take out a new federal loan.
At a time when student loan fraudster activity is on the rise, a school’s ability to co-brand a debt letter provides additional legitimacy. Students know they can trust information they're getting from their school.
Schools can enhance the trust factor with the ability to customize debt letter content, including links to their financial wellness resources, contact information for the Financial Aid Office, and the use of school's product or resource names familiar to their student body. These high-quality additions can further empower borrowers to make the very best education finance decisions.
4. No Log-In Required
It can be a little frustrating to get an email from a business you’re working with—like a utility or a credit card—and you have to log in to a website to get the information they're trying to tell you. It’s simpler to be presented with the details in the email! Presenting borrower loan information in a debt correspondence email is a compliant and streamlined way to make a quick, uncomplicated connection on this important topic.
5. Private Loans Included
Private loan information isn’t included in the ASLA. Yet it remains a large part of the student loan debt picture, and can be a pain point in a borrower’s education financing decisions. Debt letters that include private loan information provide a more complete picture of debt responsibilities.
6. State and Institutional Loans and Grants Included
Similarly, providing cumulative state and institutional loans and grants information provides a fuller debt picture and the reality of what’s expected of borrowers. The more information borrowers have in their arsenal, the better they will be in understanding the ramifications of all their borrowing decisions combined.7. Parent or Guardian Student Loan Borrowers Need Info Too
Higher education borrowing isn’t limited to students. Many parents and guardians take out loans to assist their children. Having the ability to send the parent/guardian their loan information—not just on federal loans like ASLA but on state and private loans too—is a win-win. Being aware of a fuller picture of estimated monthly payments and percent of borrowing limits can assist in future planning and decision-making for parents/guardians as well as students.
8. Legislated Requirement
Currently there are 13 states with debt letter laws: California, Florida, Illinois, Indiana, Maryland, Nebraska, Oregon, Pennsylvania, Texas, Utah, Virginia, Washington, and Wisconsin. Each state has different parameters as to which schools must comply, the information they need to provide, and when. Although schools in these states are required by law to send a debt letter, there are tools to make it easy for them to comply.
9. Low Cost
College Cost Meter is easy to implement and charges a low annual fee of $1,000 for use of the tool, unlimited email sends, and detailed reporting via a 24/7 dashboard.10. A Recommended Best Practice
Best Practices for Financial Education at Institutions of Higher Education was created by the Financial Literacy and Education Commission (FLEC) and the heads of 19 important federal agencies including the Department of Education, Department of Health and Human Services, and Consumer Financial Protection Bureau. The FLEC suggests state lawmakers and higher-ed institutions consider broader adoption of debt letters that include a host of best practices to help empower students to achieve better outcomes including making strategic degree choices, maximizing credits, and reducing borrowing.