Student Debt: No new car, caviar, four star daydream

I have been reading a lot on student debt recently, a topic that is of great interest for me as I counsel first-generation college students. My state and institution have among the highest debt rates in the country, not a statistic to celebrate.

Student Debt and the Class of 2009 is the fifth annual report from the Project on Student Debt.  It includes cumulative loan debt of students from public and private nonprofit colleges and shows that the debt level of students who graduate with student loans continues to rise with averages from $13,000 to $61,500. Low debt states are typically in the West or Southern states. High student debt rates are concentrated in the Northeast with Iowa, Minnesota, and Alaska in the top tier as exceptions. Iowa is fourth in the nation for average debt of $28,883 and second in percentage of graduates with debt, at 74%.

A variety of factors contribute to varying debt levels including cost of tuition and fees and financial aid policies of the individual institution. Generally, higher tuition is found at private colleges, but some privates, such as Cal Tech and Princeton, are also the first to institute policies of no-loan or reduced-loan for low- and middle-income students. Student debt figures are not inclusive in that not all colleges reported figures for average debt and percent with debt. In actuality, the debt figures could be and are likely much higher.

Several issues influence the accurate collection of student debt data and are recommended for improving the scope this information. These include a lack of a comprehensive annuals source of data, data on private loans, and lack of reporting on repayment terms and debt-to-income ratios for graduates in repayment.

Student Debt and the Class of 2009 reports only federal loan data. When you consider that debt attributed to private and federal student loans has surpassed $884 billion dollars in the United States and contributes to the ballooning national debt, the effectiveness and equity of relying on student loans to finance the cost of a higher education becomes paramount to all. Lawmakers and institution officials must carefully consider the impact of their tuition decisions and educate the student population as to their debt responsibility.

(Go to) Class Investment

A student of mine missed class last week. After some checking, I found that a family emergency resulted in his missing at least two days of classes. And this was just the second week of the semester.

Lynn O’Shaughnessy discussed the phenomenon of students voluntarily missing class and featured the Skip Class Calculator on her blog. The calculator helps a student determine the cost of missing a class based upon class meetings per week, attendance history, and upcoming exams. A cursory glance at the Skip Class tool found one factor missing; the money invested in missing a class.

Running an estimate based on the full-time cost of attendance at our university, an in-state resident student invests $53 to attend an hour of class. For non-resident students, the amount increases to $86 an hour. Miss 10% of classes for a semester and a student can easily waste a grand or more.

At an institution where student loan debt at graduation is among the highest in the nation and as electronic course attendance systems become commonplace on college campuses, skipping class is pouring money down the drain.

First-Year Experience Prep: The Quiz

Our dean of students office contributes to sessions throughout the university’s fifteen summer orientation programs including a welcome, faculty panel, family program and resource fair. Prior to the faculty panel that I facilitate most mornings, our orientation staff shares a list of discussion questions, a quiz of sorts, for parents and families to share with their student on the ride home from orientation. This quiz is a handy tool for any prospective first-year student and for the families they leave behind.

What is something you learned at orientation that surprised you?

What are your academic and social expectations for the first semester of college?

How will you handle things if your expectations aren’t met?

How often do you think we’ll talk and communicate during your first semester? What
will be the best times for us to connect?

How do you feel about your class schedule? Are you excited about your major?

What will you do if you get yourself into a jam?

How we should approach discussing money while you’re at school?

What information will we share through third-party access at the university?

What kind of meal plan do you think will be best for you?

How will we prepare for move-in day?

What will it be like to say goodbye?

When you think about beginning your first day at the university, what are you most excited about? What are you most nervous about?

What other topics should first-year students and their families discuss before the fall semester?

College Students & Money: No new car, caviar, four star daydream

It’s handy having a international expert on financial literacy around when counseling first-year college students about managing their resources. Iowa State professor Tahira Hira is recognized for her work on consumer spending including debt and bankruptcy. As our graduates leave campus with some of the highest student loan debt in the nation, I feel an obligation to discuss personal finance during our first-year seminar.

Dr. Hira’s three main principles for college student financial well being:
  • Live within your means.
  • Spend less that you make.
  • Be mindful of borrowing, including consumer credit or students loans.
Spending plans are key to managing finances and Hira shares these tips for students:
  • Give yourself an allowance that fits your budget.
  • Balance your checkbook regularly.
  • Leave your credit cards at home to avoid impulse buying.
  • When going out for an evening, take only as much cash as you can afford with you.
  • Eliminate casual shopping.
  • Reduce stress with exercise, hobbies, or community service; versus shopping.
Our financial aid office partners with a great online tool called CashCourse that offers financial planning tools and economic tips. I utilize CashCourse for a personal finance assignment in our seminar course.

Declining access to higher education?

I am fortunate to administer an endowed scholarship that flourishes even in these financial times thanks to careful foundation oversight and recent gifts from our generous donor. It is a partial tuition scholarship and most students also receive significant institutional and federal aid. So, I have concerns when I read that many scholarship providers are pulling back support.

Full cost of attendance at my university this fall (tuition, fees, room, board, books/supplies, personal expenses) is $18,370. The average financial need (cost of attendance minus expected family contribution) of my new class of 100 scholarship recipients is greater than $15,500. More than half of the students have need within 1% of the full cost of attendance.

With less money thrown off by endowments and contributed by donors, scholarship providers must make difficult choices. Should current scholarship recipients have their awards renewed, at the expense of new applicants? Should scholarship amounts be reduced so that the same number of students can benefit? Should the size of awards be protected, but their number cut? ~Jonathan D. Glater

Access to higher education becomes even more important in challenging economic times. Here’s hoping that scholarship providers can keep their focus on priorities.

Higher Education Priorities

Just squeaked through crunch time of awarding $1 million private scholarship dollars to students entering our university this fall. The award is equal to one-half tuition and fees for four years. Most of the students receiving this award have significant to full financial need in meeting the cost of attendance for resident students, so getting this envelope in the mail is a reason for celebration.

So why am I not celebrating?

Analysis of financial aid packages for these students show that those with stellar grades who are scrambling for outside scholarships may meet about half of their expenses through grant and gift aid, leaving $8,000 to $10,000 in loan or out-of-pocket expense. Considering that the Iowa median income is $47,000 and most recipients of this award fall below the median, how is a student to afford an education at a Midwest public research university?

Our students graduate with some of the highest student loan debt in the nation and have amassed a 58% increase in loan debt in the last decade. Our state legislature disburses 85% of the state’s $3.4 million of need-based grants to students enrolled in private, not-for-profit colleges reserving only 6% for students enrolled in public colleges and universities.

Slow economic recovery and higher student loan default rates will not improve anytime soon. Tuition freeze? Loan forgiveness? I don’t have all of the answers. But it is time to prioritize the opportunity of higher education for all students.