Unpaid college loans drag on local economy

South Bend Tribune

A recent study by the Center for American Progress shows that Indiana students have the sixth-highest debt per graduate in the country.

Of the people who started college in 2003-04, borrowed at some point then later defaulted on their loans, more than 60 percent had dropped out of college and often very early in their college career.

Ben Miller, who authored the report, said the issue is important because student loan nonrepayment has negative effects that hurt not just people but communities as well.

“If lots of people in an area have student loans but no degree, then those payments are sucking dollars out of the community without giving it the positive benefits of increased attainment. That can reduce the wealth in the community,” Miller said by email in response to several questions.

There are two ways to ease the problem of student debt, Miller explained. One is to make payments lower, and the other is to reduce the amount people borrow in the first place. “This is where you see pushes for greater state funding to freeze or reduce tuition,” Miller said.

Indiana University is one of those institutions making a significant effort toward reducing the amount borrowed and educating students about the loan process.

Three years ago IU established MoneySmarts, a website that offers financial literacy training. Each spring, every IU student receives a letter clearly stating the estimate of total education loans. Students also can take a five-week class that educates them about a variety of financial topics, including loan repayments.

Over the past two decades, tuition and fees at most of Indiana’s public colleges have increased about 200 percent, Teresa Lubbers, Indiana’s commissioner for higher education, wrote in a recent Tribune Viewpoint. Two-thirds of Hoosiers who graduate from four-year colleges hold an average debt of almost $27,000. For two-year college graduates, the average debt is more than $17,000, she said.

IU has taken an important first step in helping students grasp the realities of the cost of a college education. But as important as that is, it will be inadequate unless the state and its public colleges work together to rein in the burgeoning costs of a college education.

Other colleges would benefit by adopting some of the approaches IU is taking to educating students about loan debt. So, too, would the communities that are being affected by that unpaid debt.

This was distributed by Hoosier State Press Association. Send comments to awoods@tribtown.com.