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Give Me a Budget – Then I Will Give You a Loan

Barack Obama declared April to be financial literacy month and one community college in Virginia is taking this declaration very seriously. Tidewater CC is implementing a new approach to how it doles out federal loan dollars to its students.

As part of the federal loan program requirements, every student is required to complete an entrance loan counseling session prior to getting a loan. They also must complete an exit loan interview session upon graduation. There is no getting around it – those are the rules.

Tidewater officials have decided to expand upon the federally required entrance loan counseling session (which usually consists of some rudimentary questions about interest rates, managing debt, and loan repayment) and require students to also submit a budget of how they plan to repay their loans in addition to other expenses they anticipate accruing along the way.  Technically, they have to prepare two budgets – one that reflects repayment of the loans after graduation and another that depicts their plan for repayment if they have to suddenly drop out of college. Once the entrance counseling session is completed and Tidewater’s financial aid office has the required budget documents, they will gladly disburse any and all federal loan dollars in which a student may be eligible to receive.

I think is a great educational approach that Tidewater Community College is taking with its students and their federal loans. I can definitely see some pitfalls: administrative burden, just another hurdle for students trying to gain access to education, etc… However, many students go through the motions of securing federal (and private) education loans and never give it a second thought of what the ramifications will be for them once they have to enter into repayment. As total student loan debt surpasses credit card debt in our nation, financial literacy processes such as Tidewater’s are probably going to be more common among college campuses that are looking to provide a solid financial awareness foundation for their students (and future alumni).

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