Student Debt

What students owe and why it matters.

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The Terror of Student Debt, in B-Movie Form

Ever get that tingly feeling that you’re being followed? Not by a turnip-wielding serial bludgeoner or an animated rocking horse—because those are just my own personal nightmares—but by the specter of your student-loan payments? Then The Red, a new short film released online last week, is for you.

Borderline Films, the partnership behind the award-winning thriller Martha Marcy May Marlene, directed The Red. All the classic tropes are in place: There’s a shivering, defenseless young woman, misbehaving electronic devices, and somebody’s eyeballs going all demon-colored.

The plot is pretty basic. Two young graduates live together in an unfancy apartment, working their first jobs after graduation. While one girl is doing well—she gets a promotion early in the video—her roommate, Kate, can’t stay on top of her debt despite having a professional job. Her parents are unsympathetic, and her boss won’t pay her for overtime.

Anxiety over the looming debt takes over Kate’s life until—well, I’ll let you watch it for yourself. Just try to make sure no one walks up to your desk at the exact moment that a door slams, because I can confirm the coffee is never coming back out of those pants, no sir.

The short horror-flick-cum-PSA is brought to you by the nonprofit group American Student Assistance. Once all the fun terrorizing is out of the way, the film directs viewers to ASA’s Web site, which features resources for young borrowers like an online loan-management tool and internship searches. Three lucky people can win a sweepstakes prize of $10,000, which could help pay off some of that debt. Though, as the video itself points out, that might cover only a fraction of some students’ loans. And if they weren’t already aware of that fact, then surely the video will make it clear. You’re not afraid enough, kids.

Filed under: Student Debt, Tweed

College Takes Steps to Make Sure Its Students Graduate Debt-Free

The College of the Ozarks, a Christian liberal-arts institution in southwestern Missouri whose students pay no tuition, has stopped certifying private student loans in an effort to ensure that its students graduate debt-free, the Springfield News-Leader reported. The college, which describes itself as offering the “Hard Work U” experience, has not accepted state or federal student loans since the 1990s. It does accept any grant aid that students qualify for. Students work on the campus to pay part of their tuition, and the college makes up for the rest through institutional scholarships. Some students still borrow, though, to cover living expenses. The college’s latest move will make it difficult, if not impossible, for students to obtain loans. “The driving force behind this is that debt is bad, and we should not allow these students to do that,” the college’s president, Jerry C. Davis, told the newspaper.

Filed under: Finance, Student Debt, Students, Tuition

U.S. Is Said to Have Improved Complaint System for Student-Loan Debt Collection

The U.S. Department of Education has made “significant progress” in improving systems for borrowers who want to lodge complaints against debt collectors working on the agency’s behalf, though other concerns about the complaint process linger, according to a report released on Thursday by the National Consumer Law Center.

The report is an update of the center’s earlier review of student-loan debt collectors, which faulted them for not maintaining accessible and transparent complaint systems. The center’s new report credits the department for improving the complaint process, but recommends that the agency go further to publish data about the outcomes of borrowers’ grievances, average response times, and other information.

Among other reforms, the report says, the department should change how it compensates the collection agencies, “to incentivize respect for borrower rights and compliance with consumer-protection laws.” As it has done in other reports, the center also urges the department to eventually end its practice of using collection agencies to get borrowers out of default.

Filed under: Student Debt

House GOP Asks Obama for Long-Term Fix on Student-Loan Interest Rates

Republican members of the U.S. House of Representatives’ Committee on Education and the Workforce on Monday sent a letter to President Obama asking him to outline a long-term fix on student-loan interest rates that goes beyond the temporary one-year freeze enacted by Congress last summer. That extension, passed in June after months of disagreement, kept the interest rate on federally subsidized loans to undergraduates at 3.4 percent until July of this year. Even though Republicans and Democrats agreed about extending that rate, they were at odds for months over how to pay for it.

“As the June 30 deadline nears, it is time for us to work together on a sustainable solution to ensure students have the certainty they need to plan for the cost of attending college,” the letter states. Its signatories said they “support resolving the interest-rate cliff by moving toward a market-based interest rate for Stafford loans in a fiscally responsible manner.” The letter asks Mr. Obama to present an outline of the proposal that will be included in his budget request for the 2014 fiscal year, which it said should provide a long-term fix and the “requisite offsets to ensure taxpayers will not be forced to bear the burden of fixing this problem.”

Filed under: Government, Student Debt

Tuition Increases, Then and Now

In 1978, Tufts University’s president, Jean Mayer, apologized for the “difficult burden” that a tuition increase of $350 would place on students and their families. In a letter sent to students’ parents almost exactly 35 years ago, Mr. Mayer explained that expenses were continuing to rise, and that “every possible avenue of restraining costs” had already been explored.

Any parent with a child in college now will probably find the letter, recently obtained by The Chronicle, strikingly familiar, as tuition continues to jump every year—often accompanied by very apologetic, very sincere letters from college presidents.

But how comparable are 1978 and today when it comes to cost? The Chronicle’s tuition & fees database shows that tuition at Tufts rose by about $1,360 from 2010 to 2011. Adjusting for inflation, the $350 increase in 1978 comes to a similar number, about $1,200. Not so different, then.

However, the total tuition price tells a different story: In 1978 a year’s worth of tuition cost a student about $15,524 in today’s dollars. In 2011, Tufts students paid $42,962.

Don’t forget that those numbers do not include living expenses. The letter doesn’t offer a total cost for room and board, but the 1978 increase was $165 for both, or $570 adjusted for inflation. In this respect, modern-day Tufts fares a little better. From 2010 to 2011, the reported room-and-board cost increased by only $244. A relief, no doubt, to all the parents who may soon be receiving letters of their own for the 2013-14 school year.

But Faith Michaels, the student who received the original letter and the third in a “four-generation Tufts family,” has no regrets. Her grandparents met on the campus, her mother went there, and her son graduated from Tufts two years ago. She says that she and other students protested the day that tuition topped $5,000. Compared to now, she says, “Those were the days!”

The full text reads as follows:

February 27, 1978

To the Parents of Undergraduate Students:

Last Saturday, February 25, the Board of Trustees of Tufts College approved the 1978-79 budget for the University. The final budget was developed only after prolonged and intensive review and adoption of every possible avenue of restraining costs without compromising the quality of our educational programs. Despite our best efforts, however, expenses continue to rise. I therefore must tell you, with very real regret, that Tufts is forced to increase its tuition fee by $350, to a total of $4,500, for 1978-79. Increases of $80 on board and $85 on room were also adopted.

As a parent of a son about to enter college, and of another in graduate school, I am very keenly aware, personally as well as in my capacity as President, that these additional costs place a difficult burden on our students and their families. While they are of the same order of magnitude as those imposed by other colleges and universities, I sincerely wish, however, that Tufts had been able to avoid them. You can be assured that we shall continue to try to offer to your daughters and sons the very best education possible.

Sincerely yours,

Jean Mayer
President

Filed under: Student Debt, Tuition, Tweed, Tufts University

Analysis Adds to Data Showing the Economic Benefits of a College Degree

A new report from the State Higher Education Executive Officers offers further evidence of the value of a college degree in terms of future earnings potential. The report, “The Economic Benefit of Postsecondary Degrees: A State and National Level Analysis,” concludes that, despite substantial variations across states and disciplines, “postsecondary-degree attainment clearly results in higher earnings for the vast majority of individuals in all 50 states.” It also found that “almost without exception, each successive level of higher-educational attainment yields additional economic benefits.”

Based on an analysis of census and education statistics, the report says Americans who complete a bachelor’s degree have a median income of $50,360, compared with a median of $29,423 for people with only a high-school diploma. Those with an associate degree earn some $9,000 more than those with only a high-school diploma. Those with a graduate degree have a median income of $68,064, about one-third more than those with a bachelor’s degree.

The report also provides national and state-level data on the wage premiums associated with degree attainment across seven broad discipline categories: arts and humanities; business and communications; education; social and behavioral sciences; the STEM fields (science, technology, engineering, and mathematics); health; and trades.

Its findings mirror those of recent studies by the U.S. Treasury Department  and the U.S. Census Bureau, as well as a series of reports from Georgetown University’s Center on Education and the Workforce on topics including the relationship between college major and earnings, college major and unemployment, and occupation and earnings.

Filed under: Student Debt

Few Families Benefit From 529 College-Savings Plans, Report Says

Less than 3 percent of American families saved money for college in a 529 plan or a Coverdell Education Savings Account in 2010, and those that did tended to be much wealthier than families without those accounts, according to a report released on Wednesday by the U.S. Government Accountability Office. The report draws on data from the 2010 Survey of Consumer Finances, the 2007-8 National Postsecondary Student Aid Study, and federal tax information from 2007 to 2010. The report estimates that the median financial assets of families with those plans are about 25 times as high as families without such plans. “Although 529 plans do help some families save for college, families with less income and who are uncertain about whether their children will attend college may have less incentive to invest resources in 529 plans than in other forms of savings,” the report concludes.

Filed under: Student Debt

Benefits of Attending College Outpace Rising Costs, Report Says

Skeptics may be increasingly likely to question the value of a college degree, but the benefits of attending college are growing at a rate that outpaces spiraling tuition costs, says a report released on Friday by the Brookings Institution’s Hamilton Project. The report examines tuition increases based on calculations from the National Center for Education Statistics and earnings data from the U.S. Census Bureau. “Even if we assume that all students actually pay tuition at the published rates, the bottom line is this: While college may be 50 percent more expensive now than it was 30 years ago, the increase to lifetime earnings that a college degree brings is 75 percent higher,” the report says. It concludes that “college is still one of the best investments an individual can make.”

Filed under: Student Debt

Private-College Tuition Rises 3.9% as Student Aid Increases 6.2%

Published tuition and fees at private, nonprofit colleges rose 3.9 percent for the 2012-13 academic year, the lowest increase in four decades, according to the results of a tuition survey released on Thursday by the National Association of Independent Colleges and Universities. In recent years, private colleges’ tuition increases have hovered in the mid-4-percent range, the association found, and this year’s increase is the lowest since the 1972-73 academic year. Meanwhile, student aid at the colleges increased by 6.2 percent, slightly less than last year’s increase of 7 percent. The survey was based on responses from 445 of the association’s member colleges.

Filed under: Student Debt

Many Colleges’ Net-Price Calculators Are Still Hard to Use, Report Says

Nearly all colleges that receive federal student aid have been required to publish net-price calculators on their Web sites since last October, but a year after that rule took effect, many of those online tools are still difficult to use, according to a report released on Wednesday by the Institute for College Access & Success.

The report, “Adding It All Up 2012: Are College Net Price Calculators Easy to Find, Use, and Compare?,” examined 50 randomly selected colleges’ calculators and found that nearly a quarter of the colleges lacked a link to a calculator on their financial-aid Web sites. Three had no calculators at all. The number of questions each calculator asked also varied greatly, from eight to about 70.

The report offers a series of suggestions to improve the tools that echo those proposed in the group’s early look at net-price calculators. The report recommends that colleges limit the number of questions and keep them simple.

The deficiencies outlined in the report could explain why, in a recently released poll of students, only 35 percent of college-bound high-school seniors said they had used a net-price calculator as they considered colleges.

Filed under: Student Debt