The Indiana University Kokomo students have about $90,000 in loans between them.
And both are education majors. Paying that kind of loan back on a teacher’s salary might be tough, Abdon said.
“Our loans are so high, we’ve flirted with the idea of living with our parents for three years after we get married to pay them off,” he said.
Abdon said that wasn’t the way he wanted his marriage to start, but the alternative may be far worse. He said he doesn’t want to be shackled to that kind of debt for the rest of his life.
Abdon and his fiancee are among a growing number of students facing similar decisions.
Student loans have topped $1 trillion nationwide and have surpassed credit cards as the largest source of unsecured consumer debt, according to the U.S. Department of Education.
“The issue of student debt has come to the forefront of higher education,” said Jack Tharp, vice chancellor of student affairs at IU Kokomo. “There’s been data that shows that student debt has grown exponentially in the last five years. We have to slow that rate down.”
Tharp said some experts speculate that student loans will prompt the next big financial crisis.
“We realize it’s gotten to the point that it can be harmful,” Tharp said.
So Indiana University is trying to take a proactive approach to the issue, Tharp said. The university recently unveiled a plan to reduce student debt at all of its campuses.
Defining the problem
Tharp was part of the university task force that took an in-depth look at the issue and decided on a course of action.
The first challenge, he said, was defining the problem and gauging how big it is.
Loans in and of themselves aren’t bad, Tharp said.
When used appropriately, they allow students to earn degrees that can significantly increase their lifetime earnings, he said.
They found, though, that students sometimes borrow more than they need or take out loans with excessive interest rates. Students often lack a clear understanding of what their loan repayment rates will be and whether they will earn enough money to repay their debt, Tharp said.
It’s the interest rates that have hurt Abdon. He has state and federal loans with interest rates that top 11 percent.
He’s only borrowed $44,000, but by the time you factor interest in, he’ll fork out $78,000 for his education. He said he was shocked when he saw that number on his last loan statement.
Sixty-five percent of IU Kokomo students have borrowed some money for school.
The average debt per graduate is $21,587. That’s the second lowest among IU regional campuses but still higher than IU Bloomington.
Tharp said that fact surprises many people. They expect debt to be higher in Bloomington because the cost of school is higher there.
The student profile at regional campuses drives that number up, he said.
“We have a larger number of part-time, independent students and they borrow the most money,” he said. “They’re borrowing to pay for the cost of living.”
Independent students who are not living with their parents can borrow up to $57,500 to pay for their degrees from IU Kokomo, Tharp said.
IU Kokomo senior Ridge Knarr would never think of borrowing that much.
He’s only taken out one loan for $2,500, and that’s because the government grants he receives won’t pay for summer classes.
And it turns out he didn’t even need that much. His courses only cost him $2,000. The remaining $500 went in a bank account. He said he will use it after graduation to start repaying the loan.
“You typically take out a bigger loan than you need, but a lot of people use that extra money to buy other stuff,” he said. “They say, ‘Oh, I need a new TV.’”
Abdon admitted that he will have to take a large loan out next semester. He’ll need the extra money to finance his wedding, he said.
He did have a job that could pay for it. He was working third shift, making $13 an hour.
He would work until 8 a.m. then go to school all day. But the schedule was exhausting. He started missing assignments at school, and his productivity declined at work. He was eventually laid off.
Now, he needs the bigger loan to pay for the expenses, he said.
IU’s new plan will target at-risk students first. That includes students with excessive debt and those who are not making satisfactory academic progress as indicated by low grade-point averages and low course completion rates.
Those students will get more tailored advice from university officials.
All incoming freshmen now get a crash course in loans and borrowing during freshmen orientation. The university may also develop academic courses, seminars and workshops to help students understand issues related to debt and borrowing.
The university will change some of its business practices, too, Tharp said. IU will provide clearer information on college costs and annual statements that tell students how much they have borrowed and how much they will have to repay.
Tharp said the goal is to get students to start thinking about their loan repayments earlier. Hopefully, that will keep them from borrowing excessively, he said. Because if students wants loans, they will be able to find them somewhere, he said.
“I think there is this explosion in student indebtedness because loans are much more readily available,” Tharp said. “The majority of financial aid today is borrowing.”
Abdon said he wouldn’t have been able to go to college without the loans.
While he wishes he had managed his debt a little better, he’s not going to panic yet. He’s trying to keep things in perspective, he said.
“It could be worse,” he said.
• Lindsey Ziliak, Tribune education reporter, may be reached at 765-454-8585 or email@example.com.
©2012 the Kokomo Tribune (Kokomo, Ind.)
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