1. IS A HIGHER EDUCATION WORTH IT? Trends in College Affordability
Jenny Chandler
Sallie Mae

2. Agenda
This presentation is an overview of trends in the industry and the value of a college education
Factors Impacting Higher Education
Myths & The Larger Story
Affordability and the Middle Class

3. Factors Impacting Higher Education

4. $1.2 Trillion in Outstanding Education Loans
The outstanding balance for the private student loan market is estimated to be 7.5% of the total outstanding balances
Through September of 2014, Federal outstanding balances were $1,130B and Private outstanding balances were $92B
Source: MeasureOne Private Student Loan Performance Report Q3 2014 38
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.

5. Student Debt Levels Student Debt Levels Myth The Larger Story
Student debt is at a crisis level.
The Larger Story
More students are going to college and therefore, more students are borrowing.
Those who do are borrowing more....

6. Graduate & Undergraduate Enrollment
In the Fall of 2013, there was a slight decrease (1.4%) in overall postsecondary enrollment after a relatively flat year prior.
In the Fall of 2013, there was a decrease in undergraduate enrollment (1.6%), while graduate enrollment was flat YoY.
IPEDS Fall Enrollment Survey (actuals through December 2013, released November 2014)

7. History of Student Loan Volume
Source: Department of Education, Federal Student Aid Data Center, Federal Student Outstanding Loan Portfolio Summary; Private education loan volume estimated based on data
from Measure One, “Private Student Loan Report,” December 2013
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved. 39

8. National Student Clearinghouse Enrollment Data Fall 2014
U nit Change YoY
AY 13/ 14
AY 14/ 15
Public NFP 4 yr
26,510
169,057
Private NFP 4 yr
46,986
61,512
Public NFP 2 yr
-209,311
-390,265
For Profit 4 yr
-141,990
-5,940
T otal
-32,916
-99,794
*Actual figures, not in ,000’s
Total enrollment for the Fall 2014 semester declined (1.3%) YoY
Enrollment decreased among two-year public institutions and four-year for-profit institutions
Enrollments increased among four-year public institutions and four-year private non-profit institutions
Part of the decrease in two-year public enrollments is due to institutions being reclassified in IPEDS as four-year institutions. Without these reclassifications, two-year public enrollments would have decreased by 3.4%and the growth in four-year public enrollments would have been 0.4%.
*The Other bucket includes two-year for-profits and two-year private nonprofits
**Source: National Student Clearinghouse, Term Enrollment Estimates (actuals through Dec 2014) .

9. College Costs Continue to Increase
*Amount includes an enrollment weighted average including both in- state and out-of-state tuition amounts.
*From AY 04/05 to AY 14/15, the average published tuition at private institutions has risen 56%, while those at public 4 year schools has risen 78% and 61% at 2 year schools.
SOURCE: College Board Trends in College Pricing 2014.

10. Net Price – Not for Profit 4 Year
From AY to AY 14-15,
the average net price at private institutions has risen 26%, while those at public schools has risen 59%.
Private
Avg Published COA
$27,466
$28,746
$30,493
$31,990
$33,800
$35,071
$36,465
$37,968
$39,445
$40,954
$42,420
Growth in Published COA 5% 6% 4%
Avg Net COA
$18,682
$19,413
$20,499
$21,376
$21,779
$20,835
$20,689
$21,383
$22,107
$22,453
$23,550
Growth in Net COA 2%
-4%
-1% 3%
Discount Rate
32%
33%
36%
41%
43%
44%
45%
Public
$11,376
$12,114
$12,838
$13,560
$14,375
$15,230
$16,178
$17,154
$17,819
$18,384
$18,940 8%
$8,069
$8,685
$9,199
$9,713
$10,082
$9,988
$10,505
$11,683
$12,203
$12,393
$12,830 9%
11%
29%
28%
30%
34%
35% •
The average net tuition amount is difference between the total published tuition and fee amount and the average institutional grant amount. Discount rate is the grant amount over the published tuition amount. •
In AY 14/15, the discount rate at private 4 year schools decreased for the first time in over 10 years. 21
Source: College Board 2014 – Trends in Student Pricing
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.

11. Financial Aid - Mortgage Level of Debt Mortgage Level of Debt
Myth
Students borrow over $100,000.
The Larger Story
Only 4% of individuals with outstanding student debt owe $100,000 or more.
Most had pursued advanced degrees!
Trends in Student Aid, 2013

12. Student Debt Levels

13. News Stories are Unrepresentative

14. Higher Debt Student Borrowers are Defaulting at a Lower Rate
The Fed researchers show that the higher the debt burden, the lower the default rate. Those with burdens above $100,000 had the lowest rate at 17.6%.
Likely reasons:
Individuals with small loan balances did not finish their education.
Low-balance borrowers attained credentials such as certificates that don’t lead to the kind of jobs and salaries that a bachelor’s degree does.
Many borrowers with large loan balances are people who graduated from master’s programs and professional schools who typically end up with generous salaries
Source: Federal Reserve Bank

15. Education has lost it’s value
Myth
Some families believe College cost has outpaced its value.
Truth
College graduates make more money, on average a BA degree earns $30,000 annually more than HS
63% of jobs will require some college education or a degree

16. How Value-Added is Calculated
Brookings: Beyond College Rankings - The Value Added Approach to Assessing 2 Year and 4 Year Schools 2015

17. Will the Benefits Cover the Costs?
Subtracting the costs from benefits yields a net return on college of over $420,000
Students paying $9,000 in annual college tuition for four years can break even and begin earning additional returns in nine years
When tuition reaches $45,000 per year, which covers nearly all public colleges, the costs can be recouped in 17 years
For those who graduated at age 22, the investment is paid in full before age 40
Federal Reserve Bank Current Issues in Economics and Finance “Do the Benefits of College Outweigh the Cost?”

18. Is a College Degree Really Necessary?
No matter where a person starts, going to college increases the chances of moving up the economic ladder
Graduates from the bottom 20 percent are over six times as likely to reach the top than those who don’t go to college
The impact is also striking for those born into the second lowest 20 percent; their chances of getting to the top are five times higher with a college degree

19. Overview of Findings from Federal Reserve
The average college graduate earns enough “extra” to recover the cost of attending most colleges in fewer than 15 years
Over the past 40 years, the college earnings premium has averaged about $20,300 per year
During the recession, college graduates faced unemployment rates about half as high as those for high school graduates
Source: Federal Reserve Bank Current Issues in Economics and Finance “Do the Benefits of College Outweigh the Cost?”

20. How do your families view affordability?

21. What is middle class?

22. Define the following…
Write middle class on one side, the other affordability. Provide your definition of:
Middle Class
Affordability

23. American Middle Class
Everyone wants to believe they are middle class...But this eagerness...has led the definition to be stretched like a bungee cord — used to defend/attack/describe everything...The Drum Major Institute...places the range for middle class at individuals making between $25,000 and $100,000 a year Dante Chinni
Middle class is a socioeconomic term, whereas middle income is a calculable number. So, middle class involves perceived reality and is relative.

24. 2014 US Class Structure

25. What is Middle Income? Is dependent upon the population
Census (all citizens, employed, unemployed, retired, etc.)
Only those families with college going age children
Only those families with college going age children who are applying to a CSS/FA PROFILE school
Real School
Census
PROFILE Filers
25th Percentile
$34,000
$56,000
Median
$52,250
$111,186
75th Percentile
$107,000
$181,294

26. Median Family Income & Poverty Guidelines

27. Median Income - Michigan
Household Size
Median Income
Total Average
$ 58,632
2- person families
$51,760
3- person families
$61,301
4- person families
$73,354
5- person families
$70,363
6- person families
$61,331
7 or more person families
$53,826

28. What is Affordability?

29. Affordability…messages to consider
Does affordability change depending on the perceived value of the education or the institution?
Does affordability change if I saved and can contribute vs borrow or rely on aid?
Is this a question about sticker price or net price?
Is affordability a question about ability to pay or willingness to pay?
Does the public still believe that there is a social value to education for all?
….What else is a topic heard and how do you respond

30. Questions?