While the cost of college across the country has been going up, so has the average amount of student loan debt. Legislation in both the state and federal governments is now looking at educating students who borrow money for college about just how big their burden is.
Indiana House Bill 1042 is on its way to Gov. Mike Pence’s desk this week. The bill requires colleges and universities to let students know each year how much they owe in loans. Even if payments aren’t yet due, colleges would still be required to calculate how much a student would owe in total after interest and preview what monthly payments will look like.
Bill co-author Democratic Rep. Terri Austin says the Hoosier student attending four years of college will graduate with an average debt of nearly $28,000.
“For many students, $28,000 when it accrues interest becomes a significant amount payable over 10, 15, sometimes 20 years," Austin said. "Those debts cannot be discharged in bankruptcy, and the minute you stop taking classes, the payments are due within the first 90 days.”
Indiana University is already sending this information to students. James Kennedy is IU’s Associate Vice President for University Student Services and Systems. He says the annual letter the school sends to students has seen results.
“We’ve been able to reduce our overall on one year for undergraduates by $31 million," Kennedy said. "Over the past two years of all our students – undergrad and grad – it’s been reduced by almost $70 million.”
U.S. Sen. Joe Donnelly is using IU’s efforts as an example when introducing federal legislation aimed at student financial literacy. Like the state bill, the federal “Empowering Student Borrowers Act” wants U.S. universities to make students aware of how much they are borrowing. The difference, says Donnelly, is that the legislation does not require colleges to do so.
“People are always concerned about being forced to have one more obligation, one more regulation that’s been imposed on them," Donnelly said. "It would seem to me if you’re running a university or a college, you’d want to do this, but we’re not in the business of forcing them to.”
Compared to other states, Indiana’s average student financial burden ties with Illinois at the 13th highest. Its student loan default rate ranks 10th in the nation.