Indiana Senate passes student loan bill

The Indiana Senate overwhelmingly passed a bill Thursday that could save Hoosiers who pay for their college with student loans as much as $575 per loan and $425 million statewide.\nThe proposal, co-authored by state Sen Vi Simpson, D-Bloomington, would permit the Indiana Secondary Market for Education Loans Inc., a nonprofit corporation established by the state government in 1980, to issue student loans. Currently, ISM works as a clearinghouse for loans, buying them from Indiana banks and reissuing them to students with reduced fees. Since its inception, the organization has purchased more than $1.5 billion in student loans.\nProponents of the legislation hope introducing ISM as another lender will increase competition in the student loan market, which will drive down interest rates and fees across Indiana.\nA study completed by ISM projected that its addition to the student loan community could reduce interest rates for all student loans in the state by a half percent, saving students as much as $575 over the life of each loan. If other banks and loan agencies across the state follow ISM's lead in eliminating student loan processing fees and reduce their interest rates by a half percent, Indiana student borrowers could save $425 million on their loans over 10 years, according to the ISM study. \nIU has been watching the progress of the bill, which passed 47 to 3 Thursday in the Senate, said the University's Director of State Relations J. Thomas Forbes.\n"I think it's very timely that Indiana sets up and provides more dollars for student loans at a time when the U.S. Congress is just about going in the opposite direction," Simpson said.\nThe U.S. House passed a federal budget bill Wednesday which cut $11.9 billion from student loans programs, according to The Associated Press.\nBut Indiana Sen. Luke Kenley, R-Noblesville, who voted against the ISM bill, said making loans more accessible encourages students to incur more debt in college, which could hurt them later in life.\n"It indirectly leads to the university feeling more comfortable raising tuition," he said.\nKenley said he is concerned that adding ISM -- which pays no state taxes -- to the market will hurt for-profit banks and lenders. Kenley also voiced skepticism about the findings of ISM's study and said he believes the total savings will be much smaller than the agency projected.\nAfter its passage in the Senate, the bill must be approved by the Indiana House and signed into law by the governor. Rep. Robert Behning, R-Indianapolis, is sponsoring the bill in the House. \nNeither Forbes nor Simpson knew how well the proposal will be received in the House, but Simpson said she hopes representatives will take its overwhelming passage in the Senate into consideration.\nStudents can contact Bloomington Representatives Peggy Welch and Matt Pierce at (800) 382-9842.