Student Debt: It’s Now Part of the Admission Process F. Duane Quinn Financial Aid Specialist duane201@charter.net

Why Loans? “The student is the primary beneficiary of his / her education and should be expected to help pay for it by working, saving and borrowing”

Why Loans? Student loans are a means of borrowing in anticipation of future income. A method of financing an investment in human capital

Total Undergraduate Student Aid in Current Dollars and in 2014 Dollars (in Millions), 1990-91 to 2014-15

Total Graduate Student Aid in Current Dollars and in 2014 Dollars (in Millions), 1990-91 to 2014-15

What is the Problem? 1993 – 2012 Debt for graduating seniors has doubled $9,250 - $23,829 (+157%) At public universities $8,000 - $20,200 (+152%) Total Debt today over $1T Source: Project on Student Debt / TransUnion study

More Students are in Debt In 1994 less than 50% of graduates of 4 year colleges had debt In 2008 - 67% had debt (steady since then) In 2015 still about 67% 15.3% of parents have PLUS loans averaging $17,709 Source: Project on Student Debt

High Debt is Everywhere AR: $17,059 (45%) SD: $22,486 (79%) CA: $17,795 (48%) AZ: $17,059 (45%) MA: $23,125 (62%) CT: $26,1.38 (63%) NH: $25,785 (70%) TN: $20,312 (49%) GA: $17,296 (55%)

Investments in Postsecondary Education Can Be Risky Not all who begin will graduate Not all graduates will get high paying salary Changes in personal circumstances Changes in demands for employment

Why the Increase? Escalating Cost Gaps and Merit Aid Parents unwillingness / inability to pay Stagnant federal / state aid programs

Graduating seniors at 4 year public: 50% have at least $ 20,200 Beyond the Averages Graduating seniors at 4 year public: 50% have at least $ 20,200 25% have at least $ 26,822 10% have at least $ 39,994 Source: NPSAS

Graduating seniors at 4 year private: 50% have at least $ 27,650 Beyond the Averages Graduating seniors at 4 year private: 50% have at least $ 27,650 25% have at least $ 33,222 10% have at least $ 45,000 Source: NPSAS

In Perspective: The 8% Rule Level of Debt Payment $ 15,000--------- $ 172.62 $ 20,000--------- $ 230.16 $ 25,000--------- $ 287.70 $ 30,000-------- $ 345.24 $ 40,000-------- $ 460.32 $ 80,000-------- $ 920.64 $100,000------- $ 1150.80 $120,000------- $1380.96 Required Starting Salary $ 25,800. $ 34,500. $ 43,050. $ 51,750. $ 70,000. $ 138,096. $ 172,620 $ 207,144.

Another Approach “How Much Debt Is Too Much Debt?” Sandra Baum, Skidmore College The College Board

Consequences of Default Ruined Credit Record: Unable to buy home Unable to get car loan Credit scores for apartment / job Wage garnishment Tax refunds offset No additional financial aid

Who is at Risk for Default? Students who withdraw First generation students Students who do not aspire to a degree Low income students

The Student’s Lament “I wish I had borrowed less.” “I wish someone had told me this…”

“Attending College Without Debt” Michelle Singletary – The Color of Money You might think it’s easy for us now to say we wouldn’t have let her go. Yet, trust me, we would have had to break her heart. Understand that while going to a prestige school may seem appealing and the only option for you, at the end of the day it doesn’t matter so much where you go, but what you do when you get there.

Four Pieces of Advice from Michelle We scared her with the long-term drag of student-loan debt: “down the road, as your child’s peers are buying homes, starting families and investing for their future, your child will be servicing debt.” “Over a lifetime of employment and saving, $53,000 in education debt leads to a wealth loss of almost $208,000. Most of the loss comes from reduced retirement savings.” Robert Hiltonsmith in a report for Demos, a public policy organization.

Four Pieces of Advice from Michelle We explained the monthly impact of debt: The problem with student loans is that their monthly payments are pushed off to the future. This makes it hard for students to realize how painful the payments may be once they graduate. “When you compare graduates of four-year universities with and without debt, those who didn’t take out loans have nearly three times the net worth of their peers with debt.” William Elliott, an associate professor at the University of Kansas,

Four Pieces of Advice from Michelle We highlighted the benefit of spending less on her undergraduate degree: given the career path she’s chosen, she’ll need to go to graduate school if she wants to advance.

Four Pieces of Advice from Michelle We told her to put the college choice in perspective: Many students listen to people who convince them that they will limit their employment opportunities or won’t make needed job connections if they don’t attend a prestigious institution.

Daughter’s summary of first year… “But it’s still so much less than we would have had to pay if I had gone to Chapel Hill. So I’m glad I am at U-Md. I love it here and don’t believe that I would have liked UNC any better.”

Rule of Thumb: 4 year undergrad. Total of first year debt in award offer plus additional borrowing needed. Multiply by 4.5 Should not significantly exceed cost of tuition and fees for one year (not room and board)

Ask The Right Questions “Is this the right school for you?” “Can you afford it?” “Is there someplace else?” “Is this too much debt?” “Are there other affordable ways?” “Is it worth it?” “Will you earn enough to repay these loans?”

Parent Loans – A Different Story Federal PLUS loans do not require ability to repay. “If a bank offered you a mortgage for a million dollars, would you take it?”