Some Universities Scare Students Into Monitoring Debt

Mar 23, 2015

Indiana University sends letters to its students letting them know just how much their student loan debt is going to cost them.
Credit Owen Parrish / https://www.flickr.com/photos/oparrish/3601673876

Indiana University senior Kathryn Johnson figured out last year that she wanted to be a nurse. Her dad was hospitalized and she was fascinated by what she learned from the nurses.

"The more I talked to them and how they radiate positivity even when everything seemed so dark and dire and serious I really appreciated how professional they could be and how uplifting they could be," Johnson says.

It’s obvious Johnson has the positivity she admired in other nurses. But get her talking about her student loans and that optimism vanishes.

"I know this is terrible because I’m a senior but I haven’t thought at all about how I’m supposed to start paying that back once I’m done with my nursing program," she says.  "I have no idea."

Johnson doesn’t talk to her family about her student debt or how to responsibly manage it.  She just pushes it out of her mind.

Indiana lawmakers are trying to force students like Johnson to think it. They are considering. passing a bill that would require any university that serves students with state issued scholarships to give students an annually on their individual debt load.

IU is already doing something similar. It now emails a student a summary of their loans, including their interest rate and estimated monthly payments after graduation.

"It seemed like something nice we could do for students to help make their current debt situation more transparent and provide a little bit of education at the same time," says Phil Schuman, IU's Director of Financial Literacy. He spearheaded the debt letter initiative. The university has only sent out the letters for two years, but Schuman says they’ve already seen dramatic changes.

"The university’s debt went down by I believe 12.4-percent or $31 million, and that’s system-wide," he says.

Schuman and others who work on financial literacy at IU say the first step to reducing student debt is making students aware of their financial situation. Johnson says when she received her first debt letter from IU.

"It helped terrify me," she says with a nervous laugh.

That reaction is what prompted IU to take its financial literacy project one step further. It started MoneySmarts, a program that helps students learn the logistics of taking out student loans, how to create a budget and how to reduce expenses while in college.

Schuman says one of the most effective components is peer counseling.

After working with so many students who don’t know the basics of loan repayment, like payment plans and deferring options, peer counselor Jamie Hill admits she thinks the current system of student loan repayment is broken.

"It seems almost predatory in a way that the government is giving this money and not really giving enough information about what this is going to look like after college and when you’re not in school," Hill says.

As graduation gets closer, Kathryn Johnson says she’s getting more stressed about how she will pay off her undergraduate loans while taking out new loans for nursing school.

"I don’t know anything about a payment plan or what it is that I would be doing after I graduate, I don’t even know who to contact, I don’t know anything about that so I think that getting that information out there and more readily available for everybody in the country who needs this would be a huge advantage," she says.                                               

If passed, the bill would require schools to inform students annually of the amount of loans taken out, an estimate of debt total and an estimated monthly repayment amount.