With the national student loan debt well above the trillion-dollar mark, more and more colleges are adopting novel ways for attracting students. Recently, Adrian College, based in Adrian, Mich., announced the launch of its AdrianPlus Program that comes into effect in Fall 2014.
An Overview of the AdrianPlus Program
A new loan-repayment assistance initiative, the program offers to pay all or part of its student’s loans, if they are unable to secure well-paying jobs after completing their graduation. The college will continue to provide support to the student until:
- The student’s income rises to a level of financial sufficiency or,
- The complete repayment of the student loan takes place
Beginning in Fall 2014, Adrian College will roll out this program to all incoming freshmen and transfer students. It will issue an Award Letter to qualifying students that will specify the details of the initiative.
The college formulated this initiative to counter increasing tuition costs and student loan defaults. According to this report, Adrian College had to take out insurance policies on incoming freshman and transfer students who had student loans and at least two years of school remaining to emerge with this initiative.
The college will make full monthly loan payments for students who graduate and land jobs that pay less than $20,000 annually. The college will bear the responsibility of making these payments until the students’ incomes reach the $37,000 threshold. Similarly, for students who get jobs that pay from $20,000 to $37,000 a year, the college will make loan payments based on a sliding scale.
In addition, the college does not propose to prescribe a time limit for the repayment plan. However, it does place a maximum cap of total loan payments for students at $70,000 per student. At present, the annual cost of tuition, room and board at Adrian College amounts to $40,000 per student before financial aid.
Adrian College – The First Among Equals
One of the first colleges to take out insurance policies on its students, Adrian College paid approximately $575,000 in 2014 to take out policies for 495 students. That equates to about $1,165 per student. Students who have annual earnings of $37,000 and above after graduation will not qualify for this program. To qualify for this program, graduates will need to have jobs that occupy at least 30 hours per week.
Similarly, other colleges are also going about their own ways for instituting similar financial assistance programs for their students. For instance, Spring Arbor University, located about 35 miles northwest of Adrian College has also come up with a Loan Repayment Assistance Program (LRAP). The LRAP fixes the lower and upper income thresholds as $20,000 and $37,000 respectively. It also applies to federal student loans, private alternative loans and parent PLUS loans.
On graduating, if students get jobs that have annual incomes below $20,000 a year, they will receive reimbursements for the entire amount of their loan payments. The benefit will reduce proportionately, as their income levels approach the upper income threshold of $37,000.
Student Loan Borrowers Fail to Capitalize on Government-Backed Loan Repayment Plans
While several students struggle to repay their student loans, Danielle Douglas-Gabriel reports that only 14 percent of Americans with federal student debt enroll in government plans that enable them to lower their loan payments, if they are not earning enough money to cover these payments.
These plans enable borrowers to avoid defaulting on their loans – a problem that about 20 percent of borrowers with college debt typically encounter. The White House enacted these plans to give students more options for repaying their student loans. Unfortunately, however, not many borrowers are aware of these repayment options. Or, borrowers having some awareness of these plans often become confused when confronted with the wide range of choices, terms and paperwork required.
Douglas-Gabriel cites the example of a borrower who graduated from college with more than $118,000 in student loan debt. After graduating, the borrower had to make monthly payments amounting to $1,700 per month. To achieve this, the borrower took up a day job and a night one. However, the repayments remained an uphill climb.
Eventually, the borrower did a Google search and came across a government program that enabled borrowers to cap their monthly loan payments based on their income levels. As a result, the borrower was able to obtain a reduction on the federal loan payments from $976 a month to $105 a month. He also managed to get his private loan payments reduced from $725 a month to a little under $400 a month. To know more about these income-driven repayment plans, click here.
Making Higher Education Affordable and Alleviating the Burden of Student Loans
It is worth noting that Adrian College announced this initiative in September 2013. One of the first colleges of its size in Michigan to offer this kind of assistance to an entire incoming class, the college has received recognitions from US News and World Report as a ‘Least Debt Load’ and a ‘Best Value’ college in the Midwest. Other colleges and universities have been offering similar programs for over two decades. However, most of these have been Ivy League institutions.
By rolling out this initiative to students becoming increasingly wary of the repercussions of student loan debt, Adrian College has helped make liberal arts education more affordable. At the same time, it has also helped in mitigating the financial burdens resulting from hefty college loans that many of its students will take out.
Adrian College President Jeffrey Docking mentioned that to defray the expenses of this initiative of $575,000, Adrian College needed to bring in about 30 students. However, Adrian College has received about 50 students, thereby making the return on investment “fantastic”.
Ryan McNamara writes that over the last 40 years, tuition and fees in US colleges increased almost twelve-fold. That too, at a pace faster than food, housing and medical care. This inflation of expenses has also resulted in a decline in the number of high school graduates enrolling in college: from 70.1 percent in 2009 to 65.9 percent in 2013.
The success of Adrian College indicates that if colleges can emerge with strategies that help give their students a reliable safety net from their student loan debts, they will certainly have students lining up for enrolment. At the same time, they will be helping to arrest the ever-increasing volumes of national student loan debt.