How Much Do We Owe?

Indiana’s economy is wearing a pair of cement shoes called student debt, and it’s weighing us down. People tend to think of this as a problem for the individual in debt rather than all of us as a whole, but it’s not just a problem for recent graduates. Student loan debt slows down economic progress in our state by delaying the opportunities a person would have to invest in a home, get married, have children, and keep our state’s momentum going.

How big is the problem, really? Well, consider this: multiple universities in Indiana reported record graduation numbers last year. According to the Indiana Commission for Higher Education, on-time graduation rates have increased by about 11 percent in the last five years. Among those increasing numbers of graduates, almost 60 percent of them will finish their education with thousands of dollars in student loan debt.

The average loan amount owed by an Indiana college graduate currently stands at about $30,000 according to The Institute for College Access & Success. That average incorporates both public and private colleges and actual figures vary quite a bit between schools. For example, most of the public colleges in the state are below or close to the average of $30,000, but private schools like the Rose-Hulman Institute of Technology weigh in at almost double that figure. Many of the other private schools have debt averages in the ballpark of $35,000.

The debt problem is overshadowed by the positive statistic of increased educational attainment. While it’s true that a more educated workforce will generally produce a stronger economic future for the state, higher levels of debt are delaying growth for many. Given the state’s new initiative to equip 60 percent of our population with some form of post-secondary credential over the coming decade, levels of debt remain stubbornly burgeoning.

To add to that, Indiana is the fourth worst state for the number of student loan defaults, based on data from the US Department of Education. 14.7 percent of Indiana students that graduate with debt are currently defaulting within three years or less.

What can the state and its universities do to help combat the rising debt situation? Lowering the costs to attend would be a good place to start, and a few are finding ways of doing just that. For example, Purdue University announced recently room and board rates and tuition fees at its West Lafayette campus are both going to remain flat for the sixth consecutive year. Interestingly, the combination of those two flat rates means the total cost of attending Purdue will be less in 2019 than in 2012.

During the announcement, Purdue President Mitch Daniels said, “We are continuing our commitment to making a Purdue education obtainable and affordable for students and families.”

At the same time, Indiana University’s board of trustees approved relatively small tuition and fee increases for the 2017-18 and 2018-19 academic years. At IU Bloomington and Indiana University-Purdue University Indianapolis, rates will increase by 1.4 percent each of the next two academic years, which amounts to roughly $150. Similarly, rates went up by 1.9 percent at the university’s five regional campuses around Indiana.

IU also takes cautionary steps in educating its students about excess borrowing and exploring their options before signing into any loan programs, a strategy that’s supported by recommendations from the Institute for College Access & Success. The organization reported “most private education loans are certified by the students’ schools, and the certification requests give colleges a timely opportunity to counsel students about the risks of private loans and alternative options to explore, including untapped grant aid or federal loans.”

The organization also recommended schools establish clear, reasonable student budgets. Researchers identified a gap between the cost estimates that are used to determine how much aid students are eligible for and the actual real-world costs that are typically much higher than the estimates. The situation often means students will incur unexpected financial struggles and additional need to borrow more.

Additionally, many other universities around the state have implemented courses of study aimed at achieving completion in less than four years. If the student can handle the heavier course loads per semester, these so-called fast-track or accelerated programs could shave off substantial time and expenses for learners – in many cases by as much as 25 percent. It also gets students into careers earlier along a more direct pathway, many of which are in high-demand fields such as nursing and accounting with higher than average starting wages.

Motivating students to push themselves through accelerated programs circles back to the notion of informing them about what they’re getting into with borrowing and how much debt their increased effort could save them. Inbound students need to have a clear understanding of the costs they’re actually going to incur and their options with regard to satisfying those costs, which all begins with greater transparency.

Reducing the costs of education and the debt burden of graduates will be a boost Indiana’s economy however you slice it, especially as the push to educate more Hoosiers continues. There are numerous other strategies for addressing the issue on every affected tier: colleges, states, and the federal level. It’s going to take policy changes on all of them to help solve the problem and ensure individuals seeking education are not doing so at a financial detriment to themselves.