“Know before you owe” took on a different meaning for students at Indiana University this year. A new initiative by the school resulted in students borrowing nearly $31 million less than in previous years.

How could that be possible, you ask? With a simple letter informing students, before they took out additional loans for the next school term, what their monthly loan payment would be after graduation, Bloomberg reports.

In all, the university’s share of federal undergraduate Stafford loans dropped 11%, from $279.6 million to $249 million in just nine months – easily outpacing the national decline rate of 2%.

School officials say the new initiative, which began in the 2012-2013 school year, not only allows students to reevaluate their current loan tab and make needed changes, but it also expands their understanding of finacial aid and loans.

“If they know at all times their debt, and the repayment, it helps with a lot of planning,” associate vice president and director of financial aid at the university, Jim Kennedy tells Bloomberg.

The decline is likely a welcome change now that the outstanding student loan debt tab sits at more than $1.2 trillion. The high amount of debt has come under scrutiny lately with federal regulators, politicians and advocates calling for changes to the student loan infrastructure.

Recent studies have shown that few students understand their loan terms, something that can leave them unable to repay their loans down the road.

One student at Indiana’s Bloomington campus tells Bloomberg that after receiving her letter she decided to explore more scholarships.

“When you take out loans for the year, you just see a smaller number than the grand total,” she says. “Seeing the letter definitely put things into perspective.”

While federal law requires colleges to provide counseling to borrowers at the beginning and end of their studies, the Indiana University initiative goes a step farther. The schools have implemented personal finance course, peer-to-peer advising and added more information to its website for students to access.

Additionally, students are now required to confirm they want to take out loans on the school’s website. Kennedy says the move helps students to really understand what they are taking on.

After seeing his acquired debt, Rigo was hesitant to continue borrowing. Instead, he’s cutting expenses and saving funds from his summer job to help offset tuition costs next year.

“When I saw the grand total, it was eye-opening as to how much I borrowed and eventually I’ll have to pay that,” Hernandez said.

So, what instigated the change for Indiana University and its schools? The constantly increasing student loan default rates facing students.

The most recent rate for the Bloomington campus, for students required to start repayment in 2010 was 6.4%, up from 3.4% just a year earlier.

“I’m not surprised it drives down the borrowing once you know the consequences,” Kennedy says.

How Students at a U.S. University Borrowed $31 Million Less [Bloomberg]

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