Knowledge is a powerful thing.
And no one needs knowledge about the long-term financial impact of a college loan more than the kid who’s going to be on the hook for it.
In the past, the whole nature of disclosing information about the direct impact of college loans on one’s finances was a case of caveat emptor — “buyer beware.”
But college loan terms can be cumbersome and confusing, and without information staring them in the face, students will often ignore the impacts of their borrowing until they’re suddenly called upon to repay the loan.
Colleges and universities rely on this state of confusion to encourage more student borrowing so more people will attend their institutions, helping drive up the cumulative U.S. student debt to about $1.4 trillion.
But some states, including Florida, Indiana and Nebraska, are among those that are going out of their way to help kids keep on track, and perhaps discourage some from burying themselves debt in the first place.
Indiana University is credited with coming up with an innovation in which it sends students an annual letter that updates them on the status of their loan, including what they borrowed and what it will take to repay it.
The idea is similar to sending out a mortgage statement or a credit card statement. It helps students know where they are with the loan, information they might use to curb your borrowing or just better prepare for repayment.
The letters have been effective. As a result of providing students with this information, borrowing at Indiana University decreased 16 percent in just two years.
The disclosure statement implemented…
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