Student Loan Debt Highest at Modest Colleges

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The walking debt / Tom Woodward

August 22, 2016; Hartford Business Journal

NPQ has written a good deal about the spending habits and endowment building of large universities, which will be taken up this fall by a congressional committee. And, indeed, there is something to be said about healthy endowments, as readers will see in this newswire, but there is a have-and-have-not aspect to this story that filters down to the students.

Student loan debt is a major issue today, attracting attention in political campaigns and warnings from economists who note that total student loan debt has gone from $782 billion in 2004 to just over $1 trillion today, retreating from a high of $1.24 trillion in 2012. According to the U.S. Department of Education, “For the 2013–14 academic year, annual current dollar prices for undergraduate tuition, fees, room, and board were estimated to be $15,640 at public institutions, $40,614 at private nonprofit institutions, and $23,135 at private for-profit institutions.” The Hartford Business Journal reports that “on average, the Class of 2015 borrowed $28,400. Someone with that much student debt will be paying about $288 a month for 10 years, assuming a standard repayment plan and a 4% interest rate.”

Though it would seem that, generally speaking, the most expensive colleges would have graduates carrying the most student loan debt, this isn’t the case. The most common reason is that some universities have significant scholarship and grant programs to reduce the sticker price of a college education to a much more affordable level. Princeton, for example, offers every undergraduate sufficient scholarships and grants to avoid taking on debt. NPQ has written about Harvard’s program that pays “100 percent of tuition, fees, room, and board for students from families earning less than $65,000 a year. Families with incomes from $65,000 to $150,000 pay between zero and 10 percent of their income.”

Some less elite institutions have low tuition and fees to begin with, or unusual programs like the one at the College of the Ozarks, where students perform on-campus work to cover their tuition, leaving them to pay for books and living expenses. Richer institutions generally have a greater ability to supplement.

The highest student loan debt is carried by graduates of schools like National University and Grambling State, examples of institutions that attract students from middle- and low-income families who must borrow what Pell grants and very modest institution-based scholarship support won’t pay. At the Stevens Institute of Technology, 75 percent of students took on debt to pay their educational costs in 2015. The presence, size, and purposes of endowments and advancement programs have a lot to do with what types and amounts of support an institution provides to its students.

Determining what a college education really costs is among the more intellectually challenging exercises a college student and their family will face. Stated tuition and fees often bear no relation to actual costs once scholarships and grants are taken into account. In addition to general need-based, scholastic merit-based, and athletic support, many colleges and universities have financial aid targeted to particular degree programs or student profile characteristics. Some of this financial aid goes unused because students are unaware of it, and faculty and staff lose track of the sometimes large and bewildering array of options, each of which may only apply to a small number of their students. Price transparency is elusive, as institutions often don’t disclose (and sometimes don’t know) the true, individualized net cost to a student until the student goes through the enrollment process.

The report on institution-based student loan debt documents the disconnect between posted tuition costs and the actual long-term costs borne by a student to get a college education. It also points to the importance of strong endowments and advancement services being used to support tuition and fees as a key to reducing student debt. This also should be taken into account at upcoming congressional hearings about the building and spending of endowments of top colleges and universities.—Michael Wyland