For immediate release:
March 17, 2015
INDIANAPOLIS - Legislation co-authored by State Rep. Terri Austin (D-Anderson) that would help students understand financial literacy as they incur student debt is heading to Gov. Mike Pence for final approval.
Members of the Indiana Senate today passed House Bill 1042, which requires higher education institutions to annually provide students with estimated amounts for incurred student loans, potential total payoff amount after interest, and monthly repayments. Since Senators made no changes to the legislation, it goes straight to the governor for his consideration.
“The upsurge of tuition rates has increased reliance on student loans, and sadly, students often don’t realize how quickly their loan debt accumulates,” said Austin.
“This bill helps students understand the long-term implications of a debt of this magnitude, as well as keep them up-to-date on their loan balance. They shouldn’t have to deal with financial shocks when loan repayment begins.”
The average four-year student graduates with loan debt of $27, 886 in Indiana, tying our state with Illinois as the 13th highest state in the nation. At 11.3 percent, or 15,317 students, Indiana has a higher student loan default rate than 40 other U.S. states.
Back in February, House Democrats offered an amendment to the state biennial budget proposing a four-year tuition freeze for incoming freshmen at Indiana’s colleges and universities. The Republican Supermajority rejected the proposal by a party-line vote of 26-68.
“Filing bankruptcy isn’t even an option for Hoosiers who have a hard time paying off education debt, which giant corporations are able to do,” noted Austin. “The loan market is actually giving students a higher percentage interest rate than corporations can borrow from.”
Currently, the federal student loan interest rate is 4.66 percent for undergraduate Direct Subsidized and Unsubsidized Loans. For graduate and professional students, the rate is 6.21 percent for Direct Unsubsidized Loans and 7.21 percent for Direct PLUS Loans. These rates apply to loans taken out from July 1, 2014 through July 1, 2015.
HB 1042 states educational institutions may notify students that the provided estimates are not meant as a guarantee of the actual projected amount.
State Rep. Casey Cox (R-Fort Wayne) authored the bill, which the full Senate passed 48-1.
[Hear Rep. Austin explain the importance of HB 1042 in this 27-second mp3 clip.]