• October 21, 2014

NYU Looks for a New Approach to Help Families Understand Student-Loan Debt

After a one-year experiment in reaching out to families about student debt, New York University has discontinued the practice of calling prospective students and their parents to discuss the debt they could incur by attending. The university made 1,800 such calls last year to about a quarter of accepted students who qualified for financial aid, but the outreach had no effect on the rates of accepted students who decided to enroll.

Still, the university is grappling with how to communicate the message that NYU, one of the most expensive colleges in the country, may not be the right financial fit for everyone. The university, whose tuition, fees, room, and board are more than $50,000 a year, has more students and a smaller endowment than many similarly selective universities, so it cannot provide as much scholarship and grant aid.

Randall C. Deike, the university's vice president for enrollment management, says administrators are now discussing how to make sure families understand that NYU is a significant investment and that students and parents need to think early in the application process about how they would finance that investment over four or five years. Mr. Deike believes the message needs to reach all applicants (rather than a select group, as the phone calls did) and start earlier than when students receive their acceptance letters and financial-aid offers.

The debate about the cost of NYU and the debt some take on to attend the Manhattan institution has played out in public in the last few weeks. A columnist for The New York Times wrote a story about the almost-$100,000 debt of a young graduate and said NYU bore some of the blame for not counseling her and her family more. The column received 670 comments, which ranged from criticism of the graduate and the university to sympathy for her situation and that of other young adults in the same position.

Mr. Deike doesn't believe that NYU is responsible for providing personal financial advice to families who send students there. He prefers more general financial education.

"From a financial literacy standpoint regarding financial aid, there's more we can do and more we're going to do," Mr. Deike says.

The university is still deciding how it will present that message. In this past admissions cycle, counselors were given the OK to communicate the message that families need to carefully consider the financial aspect of choosing a college. If NYU could not meet a family's need and a student had better grant and scholarship offers from other institutions, the counselors could encourage them to weigh the different offers.

Mr. Deike, who began his college career with an associate degree, says he told some students over e-mail to consider starting at a less-expensive institution and then transferring to NYU if they could not afford to start there.

"Not being able to attend your first choice college ... [is] not the end of the world," he says. "You can still have a productive life and career."

Comments

1. paievoli - June 08, 2010 at 07:13 am

Here is a concept. Create a self-sustaining system that aids students in financing their tuition and eliminates the need for loans.

2. feudi - June 08, 2010 at 07:33 am

I agree that students need to know how much debt they can incur before they attend college, but the real question should be how did college get so expensive so quickly.

3. lindlgd - June 08, 2010 at 08:47 am

This is the crux of my published dissertation. My interviews showed that freshmen and their families knew the sticker price but not the actual costs of their college education. They had no idea how to manage such debt and no possible student loan co-signer. A plan that outlines realistic costs per year, how many courses and how long it will take student to earn the degree would be very helpful. Plan should be drawn before selection of the college is completed or no later than freshmen orientation. I have cited Masterson and field in my work.

4. bigfruitbasket - June 08, 2010 at 08:53 am

Spending $100K on an undergrad degree in the humanities is foolish. Grad school with a professional degree--maybe. Where were the NYU financial aid folks? Did anyone @ NYU counsel Ms. Munna about her finances? NYU is overrated and overpriced. She is not without fault either--she is a fool. Could she have gone to a community college or state university? Or was it all she could imagine was a sheepskin with "NYU" and her name on it? At what point did Ms. Munna do the math on her debt? Obviously, NYU doesn't teach simple math to religion and women's studies majors. Now, she wants to play the blamegame for her debt--welcome to reality, babe.

5. 12102493 - June 08, 2010 at 08:57 am

Feudi asks, "how did college get so expensive so quickly?"
Check out The Chronicle's job announcements page and take a look at how many obscure middle maagement and student support services positions are on college payrolls! Then look at how much your college spends on remediation of students who can't read, write, and/or multiply, yet believe college is an entitlement!

Regarding expense; Use the power of compound interst: If parents would save $250 per child in a college saving's fund (e.g., money market fund) from the child's birth through age 21, each child would have about $145,000 - $150,000 to pay off college debts.

6. mkant69 - June 08, 2010 at 09:25 am

New York University (NYU) has now been mentioned in major news media in connection with four different students, all with excessive debt: Courtney Munna (New York Times, 5/29/2010), Melanie Bradshaw (AOL WalletPop 5/19/2010), Ryan Durosky (CNN, 5/25/2010) and the daughter of Deborah S. (San Francisco Chronicle, 8/21/2009). This should be a wakeup call for the university.

Perhaps offers of admission and financial aid from expensive colleges should come with a black box warning label that enrollment at this university will be hazardous to your wealth. Certainly they could include an estimate of the student's debt at graduation, the income required to repay the debt, and the median income of graduates from each field of study at the university. In addition to providing an estimate of projected debt, they should show the monthly payment and total payments on that debt. If the projected debt is above the 90th percentile nationwide for debt for the specified degree program, the student should be subjected to strongly worded advice that he or she would be better off financially attending a much less expensive college. Expensive colleges need to be more aggressive in ensuring that its graduates are not buried with oppressive debt. Such counseling of current and prospective students should be up front and center.

The student's best interests should always be given higher priority than an institution's pecuniary interests. There's one thing worse than an admit-deny situation, where a college admits a student but denies them the financial aid they need to attend, and that's when the student enrolls anyway and graduates with insurmountable debt. While student loans provide cash flow assistance, they are not financial aid as they must be repaid, with interest.

NYU demonstrates that affordable debt restrictions, similar to those proposed as part of the definition of gainful employment, should be applied to all colleges, not just for-profit colleges. Just because a college is non-profit is not sufficient reason for allowing the college to routinely graduate students with excessive debt.

It would also be beneficial for all colleges to require every student to complete a financial literacy minicourse as part of orientation. While this might be too late to affect the choice of an expensive college, that does not obviate the necessity of such training. Very few students get such financial training in high school.

7. shiksha - June 08, 2010 at 12:04 pm

PERSONAL RESPONSIBILITY

Munna undoubtedly thought she would get a high paying job with her NYU degree and it didn't turn out that way.

Mom OWNS a bread and breakfast, but of course she does not to have to sell it to pay off the loans. Better to play the victim.

How hard is it to understand $100,000 and what the monthly payments are going to be?

8. 11132507 - June 08, 2010 at 01:33 pm

bigfruitbasket asks "where were the NYU Financial Aid folks?" They were doing their jobs processing those loans that the student wanted (although in these cases, students may have had some direct-to-consumer loans without the school's knowledge). I've worked in aid for >25 years and have seen students taking on absurd debt, but go ahead, just try talking them out of it. Students all expect to be successful, and they're all trained to think that there's only one college in the world they can attend...and the parents are often even worse. You will preach common sense; they will hear "you're going to fail." Trust me, I've seen it.

But what's the root of even considering this much debt in the first place? Of course, the US is still the only country that I'm aware of with the concept of a $50K cost for a year of college, and anyone who thinks that that's because of middle managers who make at best middle class wages is only looking at a very tiny sliver of the problem. These escalating costs are a perfect storm of dozens of factors, not the least of which is the good old Chivas Regal effect, and colleges have done a very poor job of trying to prevent or reverse this trend.

9. 22155974 - June 08, 2010 at 02:47 pm

The root of the problem is indeed the ever escalating cost of college, and the disconnect between that trend and trends in family incomes (down) and debt (up).
A few years ago, the federal government spent $8 billion a year on Pell Grants - now it's more like $18 billion, and they have a shortfall again. Despite that growth in 'free money,'the net cost of college continues to rise like a Mercury rocket. For some reason, the feds have a policy of no controls over cost of attendance increases at colleges as a condition for participating in the federal aid programs.
Of course, if the feds install a debt-to-starting salary-cap for student borrowing, only the rich will attend college. Not sure that is a desireable outcome.
Although, there is a general question that needs debate: "Is college right for everyone?" How long did you have to wait last time you called a plumber or electrician, and how much did they charge?

10. onthelist - June 09, 2010 at 09:29 am

As someone who works in financial aid, it's very alarming to hear that many believe the college is at fault. You might expect that families coming from less wealthy situations may lose sight of the debt storm heading their way by attending a university as expensive as NYU but we have many middle to upper-middle class families around the country, where you would expect financial management to be stronger, who have no clue how to multiply a scholarship times 4 to see that they aren't getting enough aid to sustain four years of education. It's sad.

Higher ed is too pricey and America is on the Gucci notion that pricier education is better quality education.

11. colbyafa - June 09, 2010 at 10:02 am

Financial literacy begins at home. Why wait until the child is ready for college before introducing the notion of debt?

12. unabashedmale - June 09, 2010 at 12:24 pm

College education has become the 'fool's errand', for anyone who is not pursuing a program that leads to a profession where jobs are plentiful. Just another entitlement program to soothe the electorate.

Why? Because we are losing jobs faster than we are creating them.
Technical education? Look at any engineering campus and try to find a student who speaks English. So we use our money support institutions that train foreigners - just like we bailed out all those overseas banks.

Funny how we get dumber as the population becomes more educated.

13. jinx220 - June 09, 2010 at 03:13 pm

I'm a parent whose daughter just graduated from college. She had what was a half-tuition scholarship that continued for four years (contingent upon her maintaining above a 3.0 -- a reasonable expectation).

With her financial package, the college sent me a letter with the total award -- an amount equal to half of her first-year tuition multiplied by 4. I wondered if the school would maintain the half-tuition award regardless of how much their tuition increased, or if this was meant as a notification that a half-tuition scholarship awarded in 2006 might mean a third-tuition scholarship by graduation.

Of course, it was the latter. Tuition increased each year at a rate well above the inflation rate. The fact that lots of colleges saw their endowments suffer the same fate as my personal retirement nest egg didn't help.

My daughter graduated debt-free in part because I inherited enough money as a result of my parents' premature deaths to pay the expenses not covered by her scholarship, and in part because I work for a university that offers a tuition benefit that kicked in during her senior year. The inheritance meant that filling out the FAFSA form was an exercise in futility: FAFSA determined that we could afford to pay $54,000 a year for our child's education. (Which we could do only if we lived on beans and rice, bought no new cars, and retained no savings with which to educate our second child.)

My observation is that colleges aren't up front about the fact that scholarships won't be adjusted to accommodate increases in tuition and/or lodging/food costs.

Although most people don't view an education from the totally cold perspective of a financial investment and nothing else, a student who goes heavily into debt to get a liberal arts degree is crazy. The time to go into debt, if ever, in for a graduate degree aimed at netting you a job -- and not one in academia.

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