IU's financial literacy campaign helps students understand debt


Students at Indiana University are saving a bundle of money - not on tuition, necessarily, but on federal loans. Students there are borrowing less money, and that's on purpose. In the process, they're learning real-life lessons about financial aid and the burden of paying back big loans.

The number of IU students taking out federal loans dropped 12 percent, $34 million in one year - remarkable savings for students deep in debt.

On the IUPUI campus, three-fourths of seniors like Katie Trafford have loans averaging $30,000.

"There is no other way to fund myself," she said.

But there are smarter ways to borrow. IU's seven campuses started a student financial literacy campaign and made a disturbing discovery.

"They are borrowing but they are not always understanding what comes after the degree," said Jack Tharp, Sr., Director of Financial Literacy.

Eighty percent of freshmen took a new online financial assessment. Financial aid counselors are now explaining the difference between financial grants and loans.

"I don't think that was always clear," said Tharp. "Some student's didn't get it."

Instead, many students have banks giving them more money than they need.

"Oh yeah, it feels great at first," said Cody Johnson, IUPUI sophomore.

It's so easy to spend, but much harder to pay back.

"I bought an iPad," said Morgan Pardon, IUPUI sophomore. But she admitted that she didn't need it.

To help students say no to bigger loans, the university sends them an annual financial reality check. It shows how many tens of thousands of dollars they've borrowed, how many years it will take to pay off and hundreds of dollars it will cost them every month.

Cody Johnson was surprised by how quickly loans and interest payments pile up.

"I had an idea but I found out it wasn't anything like I thought," said Johnson.

University administrators think even a small degree of financial know-how now will prevent insurmountable degrees of debt later.

Indiana's Commission for Higher Education has a lot of new information on college costs, loans and graduation rates. You might be surprised how many years most students take to earn a four year degree.

Related links:

2014 Indiana College Completion Report

ROI at a glance