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

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 Student Aid and Nonfederal Loans Used to Finance Postsecondary Education Expenses in 2011 Dollars (in Millions ), to SOURCE: The College Board, Trends in Student Aid 2012, Table 1.

Ten-Year Trend in Student Aid and Nonfederal Loans per Full-Time Equivalent (FTE) Student Used to Finance Postsecondary Education Expenses in 2011 Dollars, to SOURCE: The College Board, Trends in Student Aid 2012, Figure 1.

Undergraduate Student Aid by Source and Type (in Billions), SOURCE: The College Board, Trends in Student Aid 2012, Figure 2A.

Graduate Student Aid by Source and Type (in Billions), SOURCE: The College Board, Trends in Student Aid 2012, Figure 2B.

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 % had debt (steady since then) 15.3% of parents have PLUS loans averaging $17,709 Source: Project on Student Debt

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

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

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

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, $ $ 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.

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…”

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?”