How a Simple Letter Cut Student Borrowing by $31M

With US student debt at a staggering $1.2 trillion—including an average $30K each for member of the class of 2012—Indiana University has set an example a lot of places could learn from. The seven-campus system managed to slash student debt by far more than the national average with a simple letter that it began sending in the 2012-2013 school year. Sent out largely via email in advance of students taking loans for the subsequent year, the letter let them know what their monthly payment would be after graduation, Bloomberg finds. In the 9 months ending March 31, Federal Stafford loan disbursements to the university dropped 11%, or $31 million, compared to the year prior. The national average for the same period was a 2% drop.

"We are having more contact with the student where they can say 'I don't want this,' or 'I want less,'" says the Indiana system's director of financial aid. "If they know at all times their debt, and the repayment, it helps with a lot of planning." The letters, he says, are part of an effort to boost students' "financial literacy" with far more advice offered than that required under federal law, which only requires counseling at the beginning and end of studies. "I'm not surprised it drives down the borrowing once you know the consequences," he says. (More student debt stories.)