Student Debt and the Informed Consumer

It is hard to consume any media from a broad range of sources without encountering stories about student debt. I think. Maybe it is just because of my job I tend to notice the coverage of student debt. This is probably much the same way that I notice all the new generation Ford Escapes that have popped up since I bought mine in 2012. (However, those have been hugely successful for Ford and they have sold a lot of them.)

The Atlantic had an article earlier in the week about The Myth of Working Your Way Through College highlighting the differences in buying power of minimum wage employment in terms of a per credit basis over time. I’ve seen such analyses before, in fact, I’ve done some in the past for discussions considering new state financial aid models. I love articles like this because of the reader comments. Those are often pure gold.

After reading those for awhile tonight, I clicked onto this Daniel Greenstein commentary which I believe is prep for his speech tomorrow at the AERA conference. I’m always interested in articles about how to measure college performance. (I hope we can start doing that some day – once we have firmly established that we know how to measure what it is actually happening. Then we can measure performance.)  He starts  with a well-known metric “Because nearly 40 percent of students who start at a four-year college won’t earn a degree in six years.” It’s absolutely true – because it is all we have absolutely measured nationally. In Virginia, we know that 75% of all students who start at a public four-year institution, whether fall or spring, full-or part-time, first-time in college or new transfer complete a degree somewhere in Virginia within 10 years. It is 76% for just first-time college. Adding in data from the National Student Clearinghouse we get to almost 80%. It’s not perfect, it can be improved, but more importantly, it is a full measure. (Yes, I am bragging about my work).

Greenstein goes on to say those “who do complete a college degree increasingly carry significant debt, even as employer surveys and international comparisons suggest they lack certain skills. The trends are exacerbated by a steep drop in government funding for higher education and increased costs. Parents and students are questioning whether college is ‘worth it.'” Which is all true.The problem with the discussion of student debt, to my tumored mind, is that there seems to underlying assumption that students are entitled to not have a cost investment in their higher education. I’m not against that idea since I do believe postsecondary education is a tremendous public good, as well as a private good, however, as a nation we have not agreed upon the concept of completely free education beyond K12.

Folks that know me and have participated in meetings with me, know that I am not the least bit shy about pointing out that higher education is the only aspect of American society where parents are expected to pay for the pursuits of their adult children. An 18 year-old has complete freedom to join the military, marry, enter into contracts, and essentially pursue any legal activity except consume alcohol. If an 18 year-old attempts to attend college and ask for financial aid, all of a sudden the world changes and that legal adult must ask their parents for all kinds of personal finance information to complete the FAFSA and perhaps the CSS Profile. Parents can refuse, in which case the student can borrow their way to attendance through private lenders or they can try to prove they are actually independent of their parents (fat chance, but possible).

They are completely free to pay for college themselves – if they have the money.

Again, fat chance.

However you believe it happened, however it actually happened, whatever is going to happen in the future, we have an industry selling a product/experience to a market audience completely unable to afford it. This leaves only three options: getting somebody else to pay for it, student debt, or self-financing through work. For about 60% of undergraduates, it is a mix of the first two or all three.

When we put out the student debt reports to the institutions last fall for review prior to publication, one of the institutions questioned the maximum loan we reported for a five-year period.  The email from the financial aid officer went along the lines of, “Can you verify your data? You show us with a graduate with $171,000 in student debt, and I think that is kind of high for an art major.” Really? Kind of high? My reply was along those lines since I have an art degree as well. Unfortunately, the data were accurate and the school was able to figure out who it was and verify the amount through their own records.

What bothered me most about the entire exchange was that they did not know off-hand they had a relatively recent graduate with that much debt.

It is also bothered that that was the only discussion about such an extreme example…there were others across the Commonwealth.

In conversations about this story, at least one college president made a comment along the lines, “That’s insane! No one should pay that much for a college degree!”

Again, really? Those loans simply represented the total cost of five years of attendance at a private, residential institution. It is simply what it costs to attend…well, that and take some of the tuition money and give it to other students. But, that’s another story.

I am still troubled by this comment as it seems to call into question the perception of the product of the university that president represents. It is also an indictment of the student for not finding someone else to pay for their education. That strikes me as wrong.

I wonder if student debt is like pornography – I don’t know what the right amount is, but I know too much when I see it.

What I do know is that until the cost structure of postsecondary education changes, this discussion won’t change. There does not seem to be public and political appetite to make the current model free, especially with the current cost structure, and so a mix of student debt and having other people pay will continue. How much is the right amount of debt should be an informed decision made by the student. It is difficult to make an informed decision without adequate information about cost of attendance, graduation rates for discrete cohorts of students, likely debt amount, and historic ranges of earnings by program. These things are becoming available, thanks to the work we are doing Virginia and what is taking in other states.

More than knowing what their likelihood of graduation is, students need to know how to graduate. They need clear guidance on what it takes to graduate on time, what it costs for each additional year, and the cost of failure. These are where we should be going. If we are not going to solve the college cost problem, perhaps we can improve the college financial literacy problem.

To some degree, student debt is a choice. Certainly extreme debt is a choice, one that can be mitigated by knowing more about the wide range of options of postsecondary education available.

Wasn’t Men’s Wearhouse whose motto was, “An informed consumer is our best customer”? Might that not be an appropriate goal here?




One thought on “Student Debt and the Informed Consumer

  1. Pingback: A Festivus miracle, and associated grievances to be aired | random data from a tumored head

Be nice. It won't hurt either of us.

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