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Will Students Be Able to Repay Those Loans?

Las Vegas — Many people who work in financial aid are frustrated by news coverage that suggests lots of students are taking on six-figure debts for their bachelor’s degrees. (They’re not.)

But even if they think that talk of a student-loan crisis is overblown, aid administrators do worry about whether students will be able to repay their loans. That worry is part of their job: If too many of a college’s borrowers default, the college can lose its eligibility to participate in the federal student-aid programs.

Besides, aid administrators tend to care about access and affordability, and if many borrowers are struggling, those values are undermined.

Whether or not borrowers can manage repayment depends mainly on two factors: what they owe and what they’re earning. There is pressure on both sides of that equation right now. Greater shares of students have been borrowing for college each year, and in larger average amounts, and the job market for new graduates has been tough (although better than for their less-educated peers).

The government’s income-based repayment options for federal student loans are supposed to help, but relatively few borrowers have opted into those programs. With that in mind, a good portion of the grantees in the Bill & Melinda Gates Foundation’s Reimagining Aid Design and Delivery project proposed making income-based repayment universal. (The National Association of Student Financial Aid Administrators included the idea in its paper for the project but said it was offering “policy considerations,” not recommendations.)

In this environment, it’s no surprise that conversations on student debt broke out all over the association’s annual meeting here this week.

Purdue University lacks the money to support all of its needy out-of-state students, said Ted Malone, its executive director of financial aid, during one session on Tuesday. That means some of those students end up borrowing quite a bit. Mr. Malone’s office has started including a special note in its communication with nonresidents, asking them to consider whether the university is truly a good financial fit.

The federal “shopping sheet,” meant to help students compare aid offers from different colleges, has proved unpopular with aid administrators, who are well versed in its shortcomings and whose association has not been the biggest fan of a standard award-letter format. Still, Mr. Malone tried to capture what he liked best about the shopping sheet in a revamped aid-award letter that, among other things, separates grants from loans.

“We really have taken a strong approach,” he said, “to being really clear about how much this might cost you.”

While the financial payoff of higher education has been studied and discussed for years, more recent research has delved into the variation beneath that general trend. Reports from Georgetown University’s Center on Education and the Workforce, for instance, have shed light on how earnings vary by major and on the overlap in earnings between workers with different degree levels.

That variation led TG, a nonprofit organization that guaranteed loans in the federal bank-based program, to create a calculator called Major Choices. The tool is meant to help students in TG’s home state, Texas, understand how their income and debt obligations might stack up, depending on their college and program of study.

The salary borrowers can draw on to repay their student-loan debts depends to a large extent on their major, said Jeff Webster, assistant vice president for research and analytical services at TG, during a different presentation on Tuesday. “It’s not just going to college, but what your plan is,” he said.

Still, students at a given college tend to borrow about the same amount regardless of what they study, Mr. Webster said.

Harriet Rojas has research to back up that notion, at least for one college. Ms. Rojas studied the borrowing habits of students at Indiana Wesleyan University, where she is a business professor and chair of the business division. She looked at traditional students enrolled from 2008 to 2012, and found no statistically significant difference in what they borrowed by major.

Ms. Rojas presented her findings in a session called “How Much Debt Is Too Much?,” and she offered several answers to that question. Students have borrowed too much, she said, if their aggregate debt is greater than their anticipated starting salary, if their loan payments exceed 10 percent of their net monthly income, if they can’t find work in their field, or if they don’t live within their means. Ultimately, she said, “if the student can’t pay it back, that’s too much.”

That definition might be of limited use to someone starting college and wondering how much debt is manageable. So what guidelines should aid administrators use when they counsel students?

That’s something Shirley A. Ort has been wondering about, she said in a presentation on Monday. Ms. Ort is associate provost and director of scholarships and student aid at the University of North Carolina at Chapel Hill, an institution that has managed to keep tuition and borrowing levels low. Still, Ms. Ort said, she hopes to work with some professors to come up with benchmarks for measuring reasonable student debt.

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