1. Student Debt: It’s Now Part of the Admission Process
F. Duane Quinn
Financial Aid Specialist

2. 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”

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

4. Total Undergraduate Student Aid in Current Dollars and in 2014 Dollars (in Millions), to

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

6. 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

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

8. 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%)

9. 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

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

11. 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

12. 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

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

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

15. 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

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

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

18. “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.

19. 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.

20. 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,

21. 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.

22. 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.

23. 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.”

24. 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)

25. 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?”

26. 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?”