Fixing student debt: A common-sense approach


Note: This guest column was submitted by Michael A. McRobbie, president, Indiana University. It appeared in The Chronicle of Higher Education (subscription required) on April 10, 2017.

Last month, members of Congress were introduced to new legislation—modeled after a program at Indiana University—aimed at curbing the crippling effect that student-loan debt has on college students, their families, and our nation’s economy.

Sponsored by Rep. Luke Messer of Indiana, the proposed bill, the Letter of Estimated Annual Debt for Students Act (HR 1429), would require colleges and universities that accept federal aid to send an annual "debt letter" to every student, estimating their total loan debt and future monthly payments.

Current figures indicate that today’s student borrowers will graduate from college more than $30,000 in the red, on average. Americans owe more than $1.3 trillion (and counting) in student loans, surpassing credit-card debt and auto loans. 

The specter of major debt hangs over more students than ever, impeding their ability to establish themselves independently, productively, and successfully in society. It is of major concern for low-income or minority students, threatening to make college education unobtainable, and it is increasingly a problem for the middle class.

In the coming months, a new president, Congress, and education secretary can be expected to intensely scrutinize this issue. President Trump campaigned on the promise to work with Congress on reforms that would reduce student debt, and last fall he unveiled one proposal that would cap monthly student-loan payments as a percentage of an individual’s income. 

Our government officials have the right, and the responsibility, to question what we in higher education are doing to tackle the rapid increase in student debt nationwide and help students and their families manage borrowing so they avoid long-term difficulty. Those officials should be expected to consider any big ideas, proposals, and policy reforms that ensure that the cost of a college education is a wise investment and not merely a heavy burden.

They would also be wise to recognize that effective ideas do not always have to be the biggest or loudest. Nor do they need be bureaucratic or complex.

Just over four years ago, Indiana University set out to establish some simple programs to raise awareness about the risk of excessive borrowing and help students make informed decisions about money before, during, and after college. As part of this effort, the university began sending annual letters to all student borrowers, updating them on exactly how much they had borrowed and what it will take to repay their loans.

Today, issuing that letter is the law in Indiana, which requires public and private colleges to provide yearly information to all students who have college loans, including total estimated debt and estimated monthly payments after graduation.

Later in the 2012-13 academic year, we launched a financial-wellness program that included such features as a basic online primer about managing money, calculators to help students with budgeting and loan-repayment plans, peer coaching, and podcasts on specific financial-literacy topics. Already a model for several of our peer institutions, MoneySmarts U is now going national through a new partnership with Peter Dunn, better known as the financial authority Pete the Planner. In 2015, our national summit on student financial wellness drew more than 200 college staff members from across the country—and we expect to exceed that number in this year’s session. 

Since we began our financial-wellness program—and adopted more-vigorous policies to increase student financial assistance and promote on-time graduation—borrowing by IU students has been reduced by nearly $100 million in four years. Total student borrowing and federal loans have decreased every year since we began our efforts. Furthermore, 45 percent of our bachelor’s-degree recipients will graduate with no student-loan debt—compared with less than 30 percent nationally—and 80 percent will graduate with a balance below the national average.

Other Midwest-based initiatives are also making a real impact, including innovative money-management and peer-coaching programs at Ohio State University; the Wisconsin Hope Lab at the University of Wisconsin at Madison, the nation’s first laboratory for translational research aimed at college affordability; and a program at Cuyahoga Community College,the largest community college in Ohio, aimed at increasing access to public benefits for students who are struggling to make ends meet. And this month, the University of Oklahoma announced a financial-advising program that will match all incoming freshmen with money coaches. The university is expected to employ nine full-time coaches beginning this fall.

All of us in higher education have a responsibility to help our students make sound financial decisions based on a solid understanding of the implications of taking on excessive debt. At the same time, we must continue to work to keep a college education as affordable as possible. This means, among other actions, minimizing tuition increases and finding innovative ways to reduce operating costs and increase productivity. At Indiana University, we are in the second year of a freeze on undergraduate tuition for Indiana residents attending our flagship campus. 

We in America’s heartland are known for our common sense and reserve—yet I can’t help believing that if colleges across the country adopted some form of these straightforward, successful approaches, such as the debt letter, it could translate nationally into many billions fewer dollars of student debt. The newly introduced legislation, which we hope the Trump administration and Congress will support, is a welcome step in the right direction, but there is no reason we cannot accept the challenge now of integrating financial wellness into our college culture.