Spotlight Exclusives

Reforming Financial Aid to Power Success

commentary commentary, posted on

This commentary is part of a series highlighting the work of the 2013-14 Ideas for Action Award winners, sponsored by The Northwest Area Foundation, University of Minnesota, and University of Washington. This award recognizes organizations that take practical and innovative approaches to helping low-income individuals.

College graduation and retention rates are a national crisis. With nearly half of college students failing to obtain bachelor۪s degree within six years of enrollment, resolving this issue is crucial to the long-term success of our higher education system, as well as the economy as a whole. While many policymakers have floated proposals to try and address these gaps, the private sector and nonprofits can look to be part of the solution as well.

Our organization, the New Mexico Educators Federal Credit Union, is one of these organizations stepping up to help solve the dropout crisis. Through a partnership with the University of New Mexico (UNM), New Mexico Educators Federal Credit Union has developed Powering Success, an initiative that combines micro-aid with financial capability coaching and individualized, ongoing student support. Powering Success has the potential to transform how and by whom aid is delivered, improving higher education completion rates among financially fragile students.

The program emphasizes the reallocation and efficient use of resources. Its purpose is to enhance existing retention supports, not to replace student loans. Rather, it provides specific funding at the time the student needs it along with targeted capability coaching. We want to help students set their own goals and reject the assumption that financially fragile families cannot successfully establish paths to self-determination.

Improving graduation rates may be a national issue, but it۪s one with particular importance within our state. Forty-three percent of New Mexican residents do not have post-secondary degrees, and one in four UNM freshmen drops out due to unexpected financial challenges sometimes as little as $100.

Further, a staggeringly high number of New Mexico students come from families and backgrounds that put them at increased risk of dropping outrural, first-generation students, or the working poor. Many already rely on government assistance. These individuals do not have access to financial resources, collateral, or traditional forms of credit, and many lack financial literacy required to navigate existing supports. Higher education funding at a state level has sharply shifted over the last five years, requiring students to shoulder much more of the cost of schooling than ever before. Economic challenges are reducing many families۪ ability to manage costs.

Not surprisingly, 70 percent of UNM students who drop out cite difficulty with finances. Hard-working but disadvantaged students, when faced with an unexpected car repair or living-cost emergencies, often have few alternatives: they have no savings cushion, their credit cards are maxed out, or they lack a Bank of Mom and Dad to fall back on. Traditional lending sources aren۪t typically flexible or timely in the way that some students require.

As a result, many students go to predatory lending outlets and overextend their ability to repay. If they have future financial emergencies, these students see no alternative than to drop out of school, reducing their future earning power and, because of their mounting debt and limited earning power, increasing the likelihood of becoming economic burdens to their communities.

Financial support systems need to account for these myriad challenges. In Powering Success, students with the educational commitment to seek assistance are evaluated on a case-by-case basis and, depending on determinations about eligibility and their desire to complete school, are supported throughout the remainder of their educational tenure, ensuring their continued enrollment.

Participants receive timely, manageable micro-assistance within a range between $200 and $1,500, with funding tied to milestones that they must meet in order to remain in the program. Critically, this funding is coupled with a holistic support system that includes a weekly course on financial planning and one-on-one counseling designed to address specific challenges the individual is facing. The student must meet the milestones the assistance team requires, the university repays whatever micro-aid the student receives.

The Powering Success approach is an improvement over the traditional solution of awarding one-time scholarships to meet students۪ needs. In addition, typical scholarships don۪t cover the non-academic expenses that can derail students, and while there are some emergency scholarships, they don۪t meet all the needs that exist.

Through the program, students will finish their degrees more empowered to handle their finances and less burdened with credit card and other high-interest debt. These carefully targeted loans are designed to have delinquency low rates, creating a sustainable program while also rewarding students who demonstrate grit and resiliency in their desire to finish school. Participating students should also graduate with better credit histories, having worked off whatever funding they received while also receiving financial counseling and other support.

Efforts like Powering Success can help break the vicious cycle of high educational dropout rates and also prove that students can responsibly use micro-credit as a tool for long-term success. At a time when higher education is increasingly important, we cannot afford not to tailor financial aid to the real challenges students face.

To print a PDF version of this document, click here.

Terry Laudick is the president and CEO and Robin Brule is the vice president for community relations for the New Mexico Educators Federal Credit Union.

The views expressed in this commentary are those of the author or authors alone, and not those of Spotlight. Spotlight is a non-partisan initiative, and Spotlight۪s commentary section includes diverse perspectives on poverty. If you have a question about a commentary, please don۪t hesitate to contact us at

If you wish to submit for consideration a commentary to Spotlight, please visit our commentary guidelines and submission page.

« Back to Spotlight Exclusives