Category Archives: Student Debt

Out of Reach? How a Shared Definition of College Affordability Exposes a Crisis for Low-Income Students

Source: Mark Huelsman, Dēmos, 2016

From the summary:
Because of this, many are proposing bold solutions to address the affordability crisis—from debt-free public higher education to tuition-free community college and expanded student loan forgiveness. These efforts will continue to be debated in the 2016 election and beyond, but they would benefit from a shared definition of what “affordable college” actually means. To this point, the term “affordability” has rested more on values and feelings than a shared formula. In some ways this makes sense, as the benefits of college vary by luck, academic preparedness, the strength of the macroeconomy, and the type of institution students are able to attend. But without a definition that colleges, states, and the federal government can use, we run the risk of improperly targeting resources, ineffectively aligning efforts to fund the system, and leaving students feeling like college is financially out of reach.

This analysis attempts to use one definition of affordability—the Rule of 10, created by a consortium of experts convened at Lumina Foundation2—to figure out which states have affordable college for which students. Simply, the Rule of 10 states that college is affordable if students can meet the total net price through 10 hours of work per week and 10 percent of a family’s discretionary income over 10 years. Using this benchmark, we examined the average net price for low-income students in every state at both public four-year colleges and community colleges.

We also created two additional scenarios—a worker returning to college after 10 years in the labor force making median earnings by race, and a student paying the average net price nationally and taking on student debt—to see how this benchmark holds up for the average student, by race.

Our findings include:
– The average net price for low-income students—those from families making $30,000 or less—is unaffordable in all 50 states at both public four-year colleges and community colleges.
– The “affordability gap” varies from slightly over $10,000 for a four-year degree in Hawaii, to nearly $40,000 for students in New Hampshire.
– At community colleges, the affordability gap ranges from just over $1,000 in Mississippi to $23,000 in New Hampshire.
– Black and Latino students making the median income by race cannot accrue enough savings to make a dent in the projected net cost of college. Black adult learners face an affordability gap of over $18,000 ($7,000 more than white adult learners), and Latino adult learners face an affordability gap nearly twice as large as white learners ($21,000 to $11,000).
– Among students who take on loans and earn the expected median income for college graduates, all workers still see an affordability gap. However, black and Latino students in our scenario face larger affordability gaps (over $12,000 and $14,000 respectively), than white and Asian students.
– Doubling the maximum Pell Grant could make college affordable in up to 26 states, while increasing the minimum wage to $15 an hour could make college affordable in 7-8 states.
Why you can’t work your way through college anymore
Source: Jillian Berman, Marketwatch, July 12, 2016

Low-income students can’t afford public college by earning minimum wage and getting grants.

Why debt-free college will not solve the real problems in America’s higher education system
Source: David H. Feldman, Robert B. Archibald, The Conversation, July 11, 2016

….We have been studying America’s higher education system and college costs. Our research tells us that the deep problems in American higher education today aren’t due to the fact that students borrow or pay tuition. It is because the schools serving the bulk of America’s underprivileged students are increasingly resource-starved.

So, what should our candidates be worrying about when it comes to higher education? And what policies might make a dent in our real problems?…

Who Got Rich Off the Student Debt Crisis?

Source: James B. Steele and Lance Williams, Center for Investigative Reporting and Reveal, June 28, 2016

42 million people owe $1.3 trillion in student debt. It’s a profit center for Wall Street and the government. Here’s how we got into this mess. ….

…. A generation ago, Congress privatized a student loan program intended to give more Americans access to higher education. In its place, lawmakers created another profit center for Wall Street and a system of college finance that has fed the nation’s cycle of inequality. Step by step, Congress has enacted one law after another to make student debt the worst kind of debt for Americans – and the best kind for banks and debt collectors. Today, just about everyone involved in the student loan industry makes money off students – the banks, private investors, even the federal government. ….
‘I’m A Student-Debt Slave.’ How’d We Get Here?
Source: Eric Westervelt, NPR, July 11, 2016

Most everyone knows someone adversely affected by student debt: More than 40 million Americans are shouldering a crippling $1.3 trillion in loans.

That burden is obstructing careers, families, dreams, employment and even retirement. Uncle Sam and Wall Street have made lots of money off the crisis.

We’ve covered this issue in many ways, including the debates, the players, tips for easing debt, how debt is affecting young people’s decision making and a lot more.

But how did we get here? Who has profited most and how?

The Center for Investigative Reporting and its weekly radio show Reveal recently dug deep into these questions and profiled people who’ve been affected. I reached out to CIR reporter Lance Williams, who co-investigated the story with journalist James B. Steel. Here’s an excerpt of our conversation…..

Student Loan Calculator

Source: New York Times, December 17, 2015

One of the biggest decisions for those entering college is how to finance their education — and for more than two-thirds of those getting bachelor’s degrees, the answer involves taking on debt. The calculator below offers a guide to the borrowing picture at various institutions — and what it takes after graduation to repay the loans.

Will the Explosion of Student Debt Widen the Retirement Security Gap?

Source: Alicia H. Munnell, Wenliang Hou and Anthony Webb, Center for Retirement Research at Boston College, IB#16-2, February 2016

The brief’s key findings are:
In 2013, 55 percent of households in their twenties had student debt, with an average amount of $31,000.
The question is whether student debt – by reducing 401(k) savings and delaying home purchases – could have a big impact on retirement preparedness.
The analysis uses the National Retirement Risk Index (NRRI), which measures the percentage of working-age households “at risk” of falling short in retirement.
If NRRI households had started out with today’s student debt levels, the Index would be 56.2 percent instead of the already alarming 51.6 percent.
The bottom line is that college costs should be included in broader policy discussions over how to improve financial security.

Indentured Studenthood: The Higher Education Act and the Burden of Student Debt

Source: Elizabeth Tandy Shermer, New Labor Forum, Vol. 24 no. 3, Fall 2015
(subscription required)

From the abstract:
Promising to do something about student debt has become the means for politicians to pretend they are doing something for the 99 percent. That was true even before the 2016 election campaign really got underway. Obama, after all, promised two free years of community college in his 2015 State of the Union address. That idea, like so many others from Republicans and Democrats, did not go anywhere, even though the most recent re-authorization of the 1965 Higher Education Act (HEA) expired in 2013. However, inaction is not just a symptom of Washington gridlock. The reality is that paying for college is a confounding, sprawling sector of the economy involving loans, grants, scholarships, and tax credits. …

Report 1: Financial Distress At The Start Of College

Source: Micere Keels, Myles Durkee, & Elan Hope, Minority College Cohort Study, Occasional Report, August 2015

From the Futurity summary:
A new study of more than 500 black and Latino college students confirms that many encounter obstacles after enrolling in college without adequate financial resources. … Consequently, disproportionate numbers of blacks and Latinos are entering adulthood with college debt but without a degree. Nationally, approximately 40 percent of black and 52 percent of Latino freshmen obtain their degree within six years, compared to 63 percent of white and 70 percent of Asian students. Black and Latino students also have significantly more student debt than white and Asian students. For example, approximately 43 percent of black and 30 percent of Latino graduates have more than $30,500 in student debt, compared to 25 percent of white and 10 percent of Asian students. As a result, broadening access without increasing persistence disproportionately harms black and Latino students….

….The report is the first of a series that will be released from the Minority College Cohort Study, for which Keels is the principal investigator. The study tracks the emerging adult trajectory of black and Latino college freshmen from five public and private universities in Illinois….

Years of Cuts Threaten to Put College Out of Reach for More Students

Source: Michael Mitchell and Michael Leachman, Center on Budget and Policy Priorities, May 13, 2015

From the press release:
Higher education funding remains well below pre-recession levels in almost all states, a new CBPP report shows. Although the majority of states have begun restoring funding to their higher education systems, 47 states are spending less per student today than they did before the recession. As a result, public colleges and universities have had to raise tuition and make spending cuts that may diminish the quality of education available to students at a time when a highly educated workforce is more crucial than ever for economic growth and vitality. …. To make up for this declining state investment, public colleges and universities across the country have increased tuition considerably. Annual published tuition at four-year public colleges has risen by $2,068, or 29 percent, since the 2007-08 school year, after adjusting for inflation. In Arizona, published tuition at four-year schools is up more than 80 percent, while in five other states — California, Florida, Georgia, Hawaii, and Louisiana — it’s up more than 60 percent. These sharp increases in tuition have accelerated longer-term trends that have made college less affordable and shifted costs from states to students and their families. Federal student aid and tax credits have risen, but on average they have fallen short of covering the tuition increases. As a result, student debt levels have swelled since the start of the recession. Students now hold $1.16 trillion in student debt. ….

10 states with biggest higher education cuts

The Debt Divide: The Racial and Class Bias Behind the “New Normal” of Student Borrowing

Source: Mark Huelsman, Dēmos, May 2015

From the summary:
Today, taking out loans is the primary way individuals pay for college—a major shift in how our nation provides access to higher education. While concerns about the growth in college costs and student debt are nearly universal, much of this concern focuses on how college debt is impacting the economic well-being of college graduates and our overall economy. What has been less understood, or examined, is how this shift to a debt-based system impacts our nation’s historical commitment to ensuring everyone—regardless of race or class—can afford to go to college. We need to understand whether or not the “new normal” of debt-financed college is having an impact on our ability to make good on that fundamental promise.

This report, The Debt Divide, provides a comprehensive look at how the “new normal” of debt-financed college impacts the whole pipeline of decision-making related to college. This includes, whether to attend college at all, what type college to attend and whether to complete a degree, all the way to a host of choices about what to do for a living, and whether to save for retirement or buy a home. In an America where Black and Latino households have just a fraction of the wealth of white households, where communities of color have for decades been shut out of traditional ladders of economic opportunity, a system based entirely on acquiring debt to get ahead may have very different impacts on some communities over others.

Our analysis, using data from three U.S. Department of Education surveys, the Federal Reserve’s 2013 Survey of Consumer Finances, and existing academic literature, reveals a system that is deeply biased along class and racial lines. Our debt-financed system not only results in higher loan balances for low-income, Black and Latino students, but also results in high numbers of low-income students and students of color dropping out without receiving a credential. In addition, our debt-based system may be fundamentally impacting the post-college lives of those who are forced to take on debt to attend and complete college. Our findings include:
● Black and low-income students borrow more, and more often, to receive a bachelor’s degree, even at public institutions. ….
● Associate’s degree borrowing has spiked particularly among Black students over the past decade. ….
● Students at for-profit institutions face the highest debt burdens. ….
● Black and Latino students are dropping out with debt at higher rates than white students. ….
● Graduates with student loan debt report lower levels of job satisfaction when initially entering the workforce. ….
● Average debt levels are beyond borrowing thresholds that are deemed by research to be “positive.” ….
● While those with a college degree are more likely to save or buy a home, student debt could be acting as a barrier. ….