The U.S. Department of Education launched the Financial Awareness Counseling Tool (FACT) last week to help college students better understand their loan burdens. It provides an instant snapshot of a student's federal loan debt and allows private loans to be manually entered.
I took a test drive with my college-age son over the weekend and we discovered right away that it is helpful to have your college financial aid award letter, information on current tuition, fees and other expenses. Students also must have a federal "PIN" to access the system -- the same one used to apply online for federal financial aid. So, be sure to collect all relevant paperwork and information before you sit down or join your child at a computer. Make the most of the time with the information and prevent yourself from a frustrating experience.
FACT has some glitches that obviously require debugging (we couldn't get past the second module, for example), but it does allow students to estimate what their monthly loan payments are likely to be when they leave school and explains some of the repayment options that they might consider.
The money management tutorials are pretty basic and do not replace a more comprehensive financial literacy program, but are visually appealing and easy to navigate. They also can serve as an entry point for engaging students in a deeper conversation about financial literacy.
Some students might be a little frustrated by having to respond to some knowledge questions before moving forward, but in my book it is well worth it any time students take time to think about their current and future finances.
Easy to use, interactive online tools such as this one are key to reaching today's college students. What's trickier is getting them to actually use the tools.
It appears FACT would be most useful for first time borrowers as part of their entrance counseling. It would be more powerful if students were required to access it on an annual basis so they could monitor their loan balances as they progressed toward graduation. The tool also could be enhanced by providing a picture of what their college costs are likely to be in total to complete their degree, and comparing projected loan obligations and payments with estimated starting salaries.
Despite some its shortcomings, though, FACT is a great new addition to ever-improving personal finance tools for young adults. Some other sites, tools and online programs to consider using to guide financial literacy conversations include:
The tool you use to jumpstart the conversation on financial literacy isn't nearly as important as the conversations they will generate. Use whatever tools help you connect with your student or jumpstart an investigation into your own finances. After all, a little knowledge can go a long way.