1 Amazingly Simple Way to Cut Student Loan Debt That No One Thought of - Until Now


Flickr / silly_little_man.

Think about this statement for a minute: Education can reduce student loan debt.

Though it might sound like a paradox - after all, isn't it the pursuit of education that has ignited the college debt crisis? - the Hoosier state university system has proved that educating students about loan debt can alter their behavior in a positive way.


Last year, the seven colleges making up the Indiana University system sent letters to students giving them a sneak peek at their post-graduate monthly loan payments. The missives were a wake-up call for many, who decided against taking out additional loans, according to Bloomberg. Overall, the university system saw an 11% decline in the amount of federal Stafford loan disbursements, which fell by about $31 million over the course of the academic year.

Financial literacy campaign
While it may seem fantastic that just viewing the future effects of current behavior would make such an impression, the outcome of this experiment should not be surprising. Many students have very little understanding of their personal student debt situation, and most American families feel helpless in the face of the escalating cost of higher education, but are not proactive in trying to avoid college debt.

Indiana seems determined to buck this trend. In addition to the debt summary letters, the school has launched two other initiatives in the fight against spiraling college debt. The "MoneySmarts" online financial literacy course is now a requirement of all incoming students, and the "Finish in Four" program gives financial incentives for upperclassmen to finish their degrees timely.

Empowerment is key
Can students be "taught" to avoid onerous student debt? The answer seems to be a resounding, "yes". The Bloomberg article noted that some students, upon seeing how much debt they were accumulating, came up with alternate plans to fund their college careers - by cutting expenses, dedicating more income from work toward college costs, or by investigating available scholarship opportunities.

Being aware of how much you are borrowing is huge, and Indiana has taken additional steps to highlight that issue. The university system has begun requiring its students to let the school know which loans they plan to take on, rather than the usual regimen of blindly filling out the federal Free Application for Federal Student Aid forms online. This change alone brought about an 8% decrease in loan disbursements in one year. 

If you already have student loans, get a handle on what they are and how much you owe by visiting the National Student Loan Data System. And, before you take out any more loans, research alternative methods to cover your college costs. Thoughtful consideration has worked for others, and it can work for you, too.

Another great way to plan for your future
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

The article 1 Amazingly Simple Way to Cut Student Loan Debt That No One Thought of - Until Now originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

What is Short Selling?

Make a profit when stocks prices fall.

View Course »

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Add a Comment

*0 / 3000 Character Maximum