College Debt: Up Nearly 30% In Four Years

Over the last four years, real incomes in the United States have increased 9 percent. In the same time period, college debt levels for graduating seniors with loans have increased by nearly three times that (27 percent), according to a report released today from the Institute For College Access and Success (TICAS).

TICAS's Student Debt & the Class of 2012 annual report looks at the state of student debt among recent American college graduates, using voluntary reporting on debt levels from just over half of the four-year public and private nonprofit institutions across the country. Graduates with loans in 2012 had average student debts of $29,400 -- up more than $6,000 since TICAS last performed the survey using its current methodology four years ago. (Last year's survey, using a different methodology, showed average debts of $26,600 in 2011.)

Moreover, some private nonprofit colleges reported post-graduation debts that approached $50,000 in 2012, and more than seven in 10 American college seniors now graduate with student debt.

The report does, however, show gradual improvement in the rate of employment among college graduates: In 2012, 7.7 percent of young college graduates were unemployed -- down from 8.8 percent in 2011, and 9.1 percent in 2010.

TICAS data also show that students in some states bear substantially higher costs than their peers in other states, ranging from nearly $23,000 in Louisiana to over $33,500 in Delaware. And in many cases, those students may be far more likely to borrow for college: 78 percent of South Dakota seniors graduated with debt, while only 41 percent of Nevada seniors did.

Here's the New America Ed Central team's first take on the new TICAS numbers:

Information Blackout:

Surveys are currently the only way of knowing which institutions are loading their students with debt because industry lobbyists persuaded Congress to bar the federal government from collecting complete information.

New America Deputy Director of Higher Education Amy Laitinen says the report is “by far the best annual information we have about student debt, but -- as the authors of the report state -- likely understates the extent of the problems.” A lack of national-level data means that voluntary surveys are the only way to collect the information, and low-debt institutions are more likely to respond than high-debt schools. So few for-profit colleges respond that TICAS excludes them entirely, although B.A. recipients at those schools are likelier to borrow and to have higher amounts of student debt.

Laitinen says the largest roadblock to getting a real picture of student loan debt is the influence of the higher education lobby on Congress. “Surveys are currently the only way of knowing which institutions are loading their students with debt because industry lobbyists persuaded Congress to bar the federal government from collecting complete information,” says Laitinen. “Colleges that bury their graduates in debt in exchange for low-value degrees have good reason to want to keep prospective students from finding out about it. But students, families, and taxpayers have the right to know, on the front end, what they’re signing up for. Unless and until we have better data, they will all be left in the dark to make crucial--and expensive--decisions.”

Family Debt Excluded from Survey:

The debt levels in this report understate the true costs of college for families.

The debt levels highlighted in the TICAS report understate college debt in another way: by excluding federal Parent PLUS loans. PLUS loans, which are taken out by parents on behalf of their children, are limited only by a minimal credit check and a college’s cost of attendance. Since the credit check is narrow and lacks an ability-to-pay metric, parents have easy access to debt that they may not be able to afford. These loans are financially risky because they lack the flexible repayment terms and low interest rates of other federal student loans. In addition, parent borrowers of PLUS loans are frequently overrepresented at high-cost, for-profit institutions, which are excluded from this survey altogether.

“Colleges use Parent PLUS loans like an unlimited revenue source, allowing them to kick the college affordability can down the road,” says Rachel Fishman, New America Policy Analyst. “The debt levels in this report are the best we have given the available data, but even they understate the true costs of college for families. We need much much better data on PLUS loans, or we run the risk of letting institutions off the hook for saddling families with hundreds of millions of dollars of intergenerational debt.”

Merit Aid:

Many colleges that have the resources to better serve the neediest students remain unwilling to do so.

Many institutions, particularly private nonprofit colleges, continue to charge increasingly high prices for a four-year degree. Though some of those schools also provide significant aid to low-income students, others instead divert aid to recruiting higher-income students who can afford to pay more in tuition costs. A report by New America Senior Policy Analyst Stephen Burd found that two-thirds of private institutions analyzed charged a net price of more than $15,000 to students from families earning $30,000 per year or less.

“The new report from TICAS highlights a disturbing trend in American higher education. As college prices increase, students find themselves with few options but to take on ever-increasing amounts of debt,” Burd says. “Meanwhile, many colleges that have the resources to better serve the neediest students remain unwilling to do so. This report’s figures should be a wake-up call: We must find ways to make college more affordable, or the costs will eventually choke off access to the lowest-income students completely.”

Better Acceleration and Completion Strategies:

Students, particularly adult working learners, need more opportunities to accelerate their time to degree, earn credentials with labor market value, and combine work and learning in ways that are mutually reinforcing.

The debt levels of 2012 graduates are particularly alarming in light of their poor labor market outcomes. Add to that number the thousands of students who borrow money every year but never graduate, many of whom have worse labor market prospects and in some cases, higher debt, and it’s clear that institutions need to do a better job of ensuring their students make it to the finish line. Dual enrollment strategies for high-schoolers, prior learning assessments for knowledge gained through work or military experience, competency-based education that substitute mastery for seat time, and career pathway bridge programs that help remedial education students earn credit and credentials all hold great potential for helping students reduce their time to degree without sacrificing the quality of their education.

“Most college students today work in order to support their studies, and nearly forty percent are 24 years or older and have extensive work experience,” says Mary Alice McCarthy, Senior Policy Analyst at New America. “Students, particularly adult working learners, need more opportunities to accelerate their time to degree, earn credentials with labor market value,  and combine work and learning in ways that are mutually reinforcing.”

Affordable Debt Inaccessible:

The federal student loan program is too complicated, and too poorly designed, for many borrowers with the increasingly high debt levels noted in this report to understand they are eligible to opt-in to an affordable payment plan.

Still, not all debt is unaffordable. “Even student borrowers with large debt levels never need to make payments on their federal loans that exceed 15 percent of their discretionary income--period,” notes Jason Delisle, Director of the Federal Education Budget Project at New America. Through the federal government’s income-based repayment plans, virtually anyone with a federal student loan qualifies to make affordable payments, regardless of how much or when they borrowed or the interest rates on their loans. In fact, many borrowers can make payments well below that level.

“Unfortunately, the federal student loan program is too complicated, and too poorly designed, for many borrowers with the increasingly high debt levels noted in this report to understand they are eligible to opt-in to an affordable payment plan,” says Delisle. “Congress should simplify the program and make income-based repayment the universal plan, because it provides the greatest protections both for borrowers and for taxpayers.”"