- Disconcerting Data on Student Debt
- A 'Sky is Not Falling' Study on Loan Debt
- Financial aid 'experiment' would let colleges set borrowing limits for some federal loans
- For-Profit Colleges and Cal Grants
- 'Low-Income Students and the Perpetuation of Inequality'
- Facing Up to Debt
- Defaults Nearly Double
- Defaults Edge Higher
Debt, Dropouts and Degrees
As concerns grow about student debt and college completion, colleges and universities have been ranked in any number of ways: by sticker price, net price, cost to the taxpayer, graduation rate, default rate and more.
Now a new study is trying to combine some of those measures, taking debt loads and dropout rates into account to determine the amount of debt taken on for each degree issued.
The report, “Debt to Degree: A New Way of Measuring College Success,” was released Wednesday by Education Sector. Its authors say they aim to give a more complete picture of higher education -- rather than judging by graduation rates alone or by default rates alone -- by dividing the total amount of money undergraduates borrow at a college by the number of degrees it awards.
“The default rate only tells part of the student debt story,” said Kevin Carey, policy director of Education Sector, who conducted the study with Erin Dillon, a senior policy analyst. “We don’t believe that just because a student pays their loans back, by definition everything is fine. We’re concerned with the larger issue of greater debt burden.” In fact, the ratios in the study do not take into account whether the loans are repaid.
Outside experts said the study’s premise and conclusions were interesting but flawed in some ways, in part because it doesn’t give a clear picture of individual students’ debt burdens. “Are you trying to encourage fewer students borrowing, or are you trying to encourage less borrowing by the students who do borrow?” said Art Hauptman, an independent policy analyst. Comparing a dollar figure with the number of graduates can confuse the issue, Hauptman said.
For-profit colleges had the highest debt burdens per degree -- more than $100,000 per degree at Bridgepoint Education and Grand Canyon University, although the study noted that both institutions recently increased enrollment significantly, so many students may have taken on debt but are still working toward a degree. But the average debt per degree was still high at other for-profit institutions, including Strayer University, where it was more than $60,000, and DeVry, Inc., where about $50,000 was borrowed for every degree issued. (The study only used data for undergraduate federal student loans, and including private loans would have made the ratio even higher.)
The report offered several explanations, including low graduation rates and high borrowing rates at for-profit colleges, which typically do not offer the need-based aid that equally expensive private institutions provide. But it noted that some for-profit colleges had debt-to-credential ratios similar to private nonprofit institutions, including Corinthian Colleges ($16,560 in debt per degree) and Lincoln Educational Services ($18,209 in debt per degree), in part because those institutions focus on one- or two-year credentials that cost less overall.
At state institutions, the report noted that debt levels varied by state, even at institutions that are very similar in most respects, depending on tuition rates and state funding. Iowa State University and Florida State University are both large public institutions with similar graduation rates, ACT scores of entering freshman and proportions of low-income students, Carey and Dillon wrote. But students at Iowa State borrow $20,237 for each earned degree, while students at Florida State borrow only $10,888.
“Not all states are the same, and policy matters,” Carey said. “Whether students are burdened with loans, whether states spend less on higher education to keep prices down, that has consequences in terms of the long-term burden that students carry.”
The report only included ratios for those private universities the Carnegie Foundation for the Advancement of Teaching classifies as top research institutions. Among those, New York University had the highest ratio of debt to degrees, $25,886 per degree issued -- a figure the authors noted would not be out of place at a for-profit institution. But they also pointed out that NYU is a relative newcomer to the “elite research university scene” and does not have an endowment large enough to support the level of financial aid that its peers offer. A spokesman for NYU could not be reached for comment Wednesday.
But a reasonable amount of borrowing at a research university is not necessarily problematic, said Hauptman and Sandy Baum, a policy analyst who focuses on financial aid. Focusing narrowly on total debt overlooks whether a few students are borrowing too much or a majority of students are borrowing a reasonable amount, and ignores the cost of college for those who do not need to borrow at all.
“If you think about it, they could go no-loans and have just a few low-income students,” which would make colleges look better based on the Education Sector criteria, Baum said. “Or they could have students borrow some reasonable amount and have many more low-income students. They would look much worse on this measure, but they would be doing something better for low-income students.”
Especially for students earning a degree from an elite university, a reasonable amount of debt -- $30,000 or less -- is still a good investment, Baum said. “No matter where you go, you should think about how much you’re borrowing and you should be careful about it,” she said.
But a high ratio of debt to degrees indicates one of two things, Carey said. Either the college has a problem with graduation rates, or it has a problem with affordability. “Young students, in many cases, aren’t making good choices,” he said. “Colleges are kind of cashing the checks.”
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