The Herald-Times

Posted: Wednesday, June 11, 2014 4:53 pm | Updated: 12:15 am, Thu Jun 12, 2014.

By MJ Slaby 812-331-4371 |

What happens when unsubsidized loans are limited for college students?

For Ivy Tech Community College Bloomington students, it’s millions less in future loan payments.

In 2012-13, students at this campus had $6.8 million in unsubsidized loans. This school year, it dropped to $3.5 million, said Pat McCafferty, director of financial aid for the campus.

“I’m so excited in the difference,” she said.

The drop comes from a Department of Education experimental site initiative to limit the amount of unsubsidized loans a student can take on. It began in fall 2013 at every Ivy Tech campus.

With federally subsidized student loans, the federal government pays interest on the loans while the student is still in school. With unsubsidized loans, the student is responsible for accrued interest from the start, said Ben Burton, Ivy Tech chief student financial resource officer.

Currently, the law says students must be informed of all loans for which they are eligible, subsidized and unsubsidized. The initiative changes that.

Instead of students being offered subsidized and unsubsidized loans at the same time, students have to fill out a separate loan request form for unsubsidized loans, McCafferty said. Plus, the amount students could borrow in unsubsidized loans each year fell from $9,500 to $7,500, she said.

“It’s those coupled that made the dramatic impact,” McCafferty said.

She said students often see how much they can take in loans and take it all, not thinking about their debt or the amount they really need.

“I have students come in that don’t know how much they’ve borrowed,” McCafferty said. But with this initiative, she said, Ivy Tech wants students to understand how loans can add up and become a hardship.

By talking with students about payment options and loan history as well as requiring the request form for the unsubsidized loans, they can choose just what they need, McCafferty said.

Ivy Tech submitted the idea as an experimental initiative to the DOE and is the only school in Indiana participating, along with about 10 other schools across the country, Burton said. The experiment will go on for four years before potential changes could be made.

He said the idea is popular with community colleges such as Ivy Tech.

Many community college students are often already out in the workplace, and think they need loans to go to school, Burton said.

But Ivy Tech, with a relatively low tuition, allows many students to actually cover tuition and book costs with grants and scholarships, and often students end up using the remainder of their loans for living expenses and travel, he said.

Burton said his advice would be for students to only use federally subsidized loans if possible, so they have less debt.

“We want students to think, ‘Hey, I really can do this without going that far into debt,’” he said.

He said the initiative also allows students to save loan money if they decide to continue working toward their bachelor’s degrees.

And that money saved makes a difference as students start their careers and start making loan payments, McCafferty said.

“Most important is their future lifestyle and their ability to do well in the future,” she said.

About Ivy Tech Community College

Ivy Tech Community College is Indiana's largest public postsecondary institution and the nation's largest singly accredited statewide community college system, accredited by the Higher Learning Commission. Ivy Tech has campuses throughout Indiana and also serves thousands of students annually online. It serves as the state's engine of workforce development, offering associate degrees, long- and short-term certificate programs, industry certifications, and training that aligns with the needs of the community. The College provides a seamless transfer to other colleges and universities in Indiana, as well as out of state, for a more affordable route to a bachelor's degree.