An August 11th article in The New York Times caught my attention.  Written by Tamar Lewin, the article describes a policy brief released by the College Board which concludes that for the most part, recent graduates are carrying “manageable” debt loads.  Using data published in the Department of Education’s National Postsecondary Student Aid Study, the policy brief notes that while the number of students using loans to pay for their post-secondary educations has increased in the last five years, the volume of students who carry overly burdensome levels of debt upon graduation remains small in comparison.

According to the policy brief, of the students who earned a degree or certificate program during the 2007-2008 academic year, some 41 percent graduated with no debt whatsoever.  Those students borrowing more than $40,000 to pay for their educations represented only six percent of total student borrowing.  Students borrowing money to pay for a certificate program carried substantially less debt overall than those borrowing money to pay for an associate or bachelors degree.  A meager one percent of those borrowing money for a certificate program found themselves $40,000 or more in debt upon graduation while ten percent of those borrowing to complete a bachelors degree carried that level of debt or more upon graduation.  The above statistics found in the College Board’s policy brief are logical when one considers the number of credits required to complete each of the three degree types compared above.  What’s not logical is the $40,000 threshold selected to evaluate reasonable debt loads.  Obtaining a $40,000 loan for a certificate program is almost certain to lead to a negative ROI unless the certificate is related to technical training in an extremely high paying profession.  Even then, it is a risky venture.  While borrowing $40,000 for a four year degree sounds better, it may not be relative to the average loan balance of graduating students.  The College Board briefing does not take into account the students who borrow money to attend college who don’t graduate at all, or the students who attend college until their money runs out.  Using limited outcomes with a broad brush to stimulate policy discussions can be misleading.  With approximately half of college freshmen graduating in six years, we shouldn’t ignore the half that don’t finish.

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I have had a few weeks to think about President Obama’s Stimulus Act and its impact on higher education.  During the same period of time, I have read the daily headlines covering higher education in The Chronicle of Higher Education, Inside Higher Education, and New Realities in Higher Education.  The news is not good. 

In a typical year, the federal government contributes approximately $20 billion to higher education and the states contribute about $80 billion. At the state level, funding for higher education is behind mandated priorities such as K-12 education and Medicaid.  Many governors and legislatures have relied on the public’s willingness to bear tuition increases and in times of budgetary crisis, have pared back funding to higher education assuming that the colleges can increase tuition to offset the state funding cuts.  Given the fall in real estate values and real estate foreclosures, the unprecedented level of job layoffs at companies reacting to the economic downturn, the lower income taxes paid by fewer people working, lower sales taxes paid by people forced to pare back on their discretionary expenditures; it is inevitable that most of the state budgets have to be reduced this year and next.  Some states like Maryland are using some of the stimulus funds to delay cuts to education.  Other states are unable to use stimulus funds to absorb all of the declines in tax revenues and are cutting higher education before K-12.  Among the more notable state cuts that I have read about include:

• Tennessee – $180 million in cuts over two years
• North Carolina – $175 million in cuts this year and $191 million next year
• Washington – $500 million in cuts
• Arizona – $388 million in cuts
• California – $1.1 billion in cuts
• Louisiana – $219 million in cuts

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Earlier this month, I posted an article on The College Board’s annual report, Trends in College Pricing.  There is a companion report to Trends in College Pricing, Trends in Student Aid.   Published since 1983, this year’s Trends in Student Aid report is only 20 pages long but is supplemented by a website that provides detailed information on all aspects of student aid.  As I mentioned in my article on the Trends in College Pricing report, The College Board encourages individuals like me to share the information in their articles as long as the College Board is given credit for the data discussed.

There are some interesting trends described in this year’s report that show positive government support of higher education.  For example, over the past decade, there has been a 78% increase in the use of federal Pell Grants to fund higher education.  Since Pell Grants do not require repayment, they offer an obviously ideal opportunity for students.  Unfortunately, many students do not qualify for Pell Grants and have to use federal and private loans to pay for their education.  The percentage of students at elite institutions who qualify for Pell Grants is often 10% or less.  A much higher percentage of community college students qualify for Pell Grants than at other institutions.  The report also calculates the benefits received from education tax credits.  These credits have increased 86%, from $3,791 per student during the 1998-1999 academic year (the program did not exist prior to 98-99) to $7,040 during the 2007-2008 academic year.

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