In the month of May, we bid our congratulations and well-wishes to a class of college graduates at the cusp of their careers. Before them lies boundless opportunity for achievement, endowed with the knowledge, passion and ambition to chart a remarkable course.
For every new graduate, this month is a time of hope and aspiration as they look towards the future. But for a majority, paying down a sizable student loan bill also awaits. Graduates of the class of 2015 will enter the workforce saddled with an average of $35,051 in student debt – no small number for young Hoosier adults beginning to lay the financial foundation for the rest of their lives.
A looming $1.2 trillion outstanding education debt in the U.S. now surpasses that of our nation’s credit card debt. These figures bring to the forefront serious questions concerning student loans and debt literacy among young borrowers – a conversation that has made its way to our very own state capitol.
This session, Indiana went on the offensive, implementing an approach to loan education that aims to empower the state’s college students. The General Assembly passed House Enrolled Act (HEA) 1042 with the intent to give heightened loan perspective to students attending a postsecondary educational institution.
Beginning July 1, Indiana colleges and universities will be required to provide students with information pertaining to their education loans, including loan totals, total payoff amount, monthly repayment amounts and percent of borrowing limit reached. Often, college students do not fully understand the amount of debt they are taking on and may even accept loans they do not need because they are unaware of how much debt they have already incurred. By showing them the impact that their loans will have – for instance, they may be looking at a $200 monthly payment upon graduation – it may persuade them to make different decisions about their borrowing choices.
While this new law comes at little additional costs for universities to implement, it is expected to pay dividends for students and their financial decisions. In fact, this legislation was introduced after seeing the dramatic, positive results of a financial literacy program implemented at Indiana University Bloomington. As a result of this program, the amount of federal loan dollars their students took out decreased by $31 million or about 11 percent for the 2013-2014 academic year. Despite Indiana University’s drop in loan volume, enrollment and financial-aid needs remained constant; a sign indicative of students’ nod to the value their education holds, but pursuing it with fiscal responsibility in mind.
At its core, HEA 1042 aims to expand students’ financial-aid literacy. In doing so, we hope to equip Hoosier students with the tools and resources to cultivate responsible, financially sensible decision-making from the onslaught of their college career. This new law serves as an important step towards addressing the rising debt that comes in tow with increasing enrollment in higher education. I am proud of our efforts to put tomorrow’s Hoosier workforce front-of-mind and champion a better financial future for Indiana’s young adults.