A slam dunk solution to student loan debt

Posted by: Jay Wood  | Thursday, March 19, 2015

With March Madness underway, millions of eyes are glued to the hardwood as the titans of college basketball square off in hopes of reaching the Final Four. Success on the basketball court requires the elimination of mental distractions. In the movie Hoosiers, Gene Hackman’s character focuses his team prior to the championship game by saying, “Forget about the crowds, the size of the school, their fancy uniforms and remember what got you here. Focus on the fundamentals that we've gone over time and time again.”

While some college players might choose to play in the NBA, others will go on to become an architect or business professional. Regardless of what career path is pursued, all college students must overcome numerous challenges in order to be successful. Unfortunately today, students are facing challenges even before they step foot into a classroom; the largest being college affordability.

With a sharp increase in student loan defaults over the past few years, taxpayers have reason for concern. Although the tuition rates at many colleges and universities are at an all-time high, in many cases, student loan borrowing exceeds the cost of education. This is sometimes referred to as a “lifestyle gap,” meaning that students are borrowing money that goes beyond their educational needs.

About two years ago, Indiana University began a financial literacy initiative aimed at informing students about the long-term consequences of borrowing. The university sent a letter to prospective borrowers detailing their likely monthly payments and the total payoff amount after the life of their loan. In just one year, federal undergraduate loan disbursements decreased 11 percent, equaling $31 million. When provided the facts, many IU students and their families began significantly reducing their lifestyle gap.

This session, I authored House Bill 1042, which requires every institution that accepts student financial aid from the state of Indiana to provide potential borrowers with information regarding their loans such as monthly payment and total payoff amounts, similar to what IU is doing. With this information, students and their families can better decide what course of action is right for them as well as plan for the future, adjusting their lives accordingly.

Reducing student loan debt accomplishes two primary goals. First and foremost, it eases the financial burdens of thousands of young people who are looking to begin their career and eventually buy a home and start a family. It also eases the potential burden on taxpayers who might otherwise be on the hook for student loan defaults. House Bill 1042 has been passed by both the House and the Senate and is now being sent to the governor for his signature.

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Rep. Cox serves a portion of Allen County.