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What We Don't Know About Debt

May 18, 2012

On the new "college scorecard," a proposed federal tool intended to give a one-page picture of a college's tuition prices and financial aid policies, one factor is considered crucial -- and unavailable.

Students should consider the average debt per student at graduation, the department wrote. But that box on the scorecard contains only a note -- "We don't have this information yet" -- that encourages students to seek it out themselves.

Student debt has been a hot topic lately, both in the 2012 presidential race and in national news media, most recently in a high-profile (and hotly contested) New York Times article that highlighted colleges with high levels of debt nationwide. But pieces of information crucial to understanding the problem fully, especially  how much students borrow at each college, are unavailable -- and that's not likely to change anytime soon.

The lack of readily accessible, accurate information about borrowing at specific colleges means that prospective students can’t use the information in their decisions about whether or not to apply. It also makes it more difficult for colleges to compare their own students' indebtedness with that of students at other institutions -- a process that some say might lead to changes in financial aid policy at colleges where students carry an abnormally high debt load.

“It’s unacceptable,” said Lauren Asher, president of the Institute for College Access and Success, whose Project on Student Debt evaluates colleges based on the available information about indebtedness, which is provided voluntarily by colleges participating in the Common Data Set. “We’re going with the best we’ve got. Making this information public is part of what helps push the conversation forward.”

Data are readily available on student debt for broad groups of borrowers. The National Center for Education Statistics provides data on borrowing by institution type, student cohort, family income and other variables for students who graduated in 2008, including the percentage of students who took out federal or private loans to attend college and how borrowing compares across private nonprofit, public and for-profit colleges and universities. The data, from the National Postsecondary Student Aid Survey, are collected only every four years.

The Federal Reserve Bank of New York has studied all outstanding student loan debt, including both federal and private loans, across age groups, including repayment rates. The Project on Student Debt used federal data and projections to estimate the average amount of debt at graduation, about $25,250. The College Board's annual Trends in Student Aid report also looks at borrowers as a group, including both public and private loans, but does not break out data for individual institutions.

But even these broad trends can be up for debate: the dispute over when, exactly, student debt passed $1 trillion (or whether it already has) arose from conflicting information about federal and private student loan debt. The Federal Reserve estimated in March that student debt stood at $870 billion; the Consumer Financial Protection Bureau, a new government agency that will regulate private student loans, said at the same time that it had already passed $1 trillion. At the institutional level, the picture is even less clear. The Education Department released median debt for borrowers entering repayment in 2009, but the information includes only federal loans, which have a lifetime borrowing limit of $31,000 for most traditional undergraduate students. (Independent students can borrow up to $57,500.) It also combines undergraduate programs with graduate programs, which have higher borrowing limits for federal loans.

Several college guides and surveys ask about total student loan debt, including both federal and private loans: U.S. News and World Report, Peterson’s and the College Board, using a common set of definitions and standards known as the Common Data Set. The results of those surveys can be purchased and evaluated: the Project on Student Debt used information from Peterson's for its most recent report on student indebtedness, focusing on the class of 2010.

Those data, considered the best available, are rife with possible inaccuracies. The surveys are voluntary, and almost half of all colleges and universities don’t participate at all. Those who do answer represent more than half of all students enrolled in higher education, but they underrepresent for-profit colleges and community colleges and are skewed toward private and large public institutions (those that tend to get ranked and analyzed by the college guides).

The results are not audited, so colleges may report out-of-date figures on student indebtedness to make themselves look better than their peers. Colleges also might not be aware of all debt that students carry, and the survey excludes transfer students, who could have debt from a college they previously attended. Colleges also might not be aware of all of their students’ private loans, Asher said. (Note: This paragraph has been updated to correct an error.)

The data also does not include parents who take out loans on their children's behalf. Whether it should is up for debate: some argue that because the parent loans are intended to meet the expected family contribution as calculated by the Free Application for Federal Student Aid, not to close the gap between the expected contribution and financial aid, parental borrowing should be excluded. Still, since parent loans aren't taken into account, some borrowing to attend college goes uncounted altogether.

The result: No one knows how much, on average, students borrow at every institution to attend college. That has possible consequences, both for students, who can’t consider average debt early in the college selection process, before they’ve applied for and received financial aid, and for colleges themselves, which don’t have a complete and accurate way to compare themselves to their peers.

The federal government appears to be edging closer to collecting some data on combined federal and private borrowing. The Consumer Financial Protection Bureau is studying private student loans. The "gainful employment" regulation, which judges vocational and certificate programs based in part on whether students are able to pay off their loans, will include both federal and private borrowing data per student when it is released sometime in the coming weeks. On the "college scorecard," the Education Department said the administration is seeking a way to provide information on average student loan debt.

"We ought to be able to look and say, 'Some of these schools are high debt, some of these schools are low debt,' and have some way of signaling to people not just how many people finish, but when they finish, how many of them have loans," Asher said.

 

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