37 % of public& 55 % of private college grads will have unmanageable debt

Parents Forum
1

<p>Today’s edtion of the Dartmouth addresses Penn’s new FA policy and warns against students and parents oversimplifying the financial aid equation.</p>

<p>“To simply say that there will be no contribution if the income is below a certain figure departs from need-based aid in some instances,” Hazen said. She cited a hypothetical example of a student with a family income of $30,000, but $2 million in assets.</p>

<p>“If you based the determination strictly on income as some institutions are proposing, the student [with $2 million in assets] would get significant aid,” Hazen said.</p>

<p>Penn, like Dartmouth, says that it examines each student’s financial aid situation beyond family earnings.</p>

<p>Rather than departing from need-based aid, [schools] could either lower the amount they are expecting students to borrow or do outreach to schools to ensure that the needy students receive the education and guidance they need to qualify for college," Hazen said.</p>

<p>All of this discussion surrounding the most effective financial aid strategies is especially timely for the College, considering the results of a report by the New Hampshire Public Interest Research Group released April 5. </p>

<p>According to the survey, 54 percent of public college and 67 percent of private college graduates would have unmanageable debt as starting teachers in New Hampshire. Furthermore, 37 percent of public and 55 percent of private college graduates would have unmanageable debt as social workers across the nation. </p>

<p><a href=“http://www.thedartmouth.com/article.php?aid=2006041001040[/url]”>http://www.thedartmouth.com/article.php?aid=2006041001040&lt;/a&gt;&lt;/p&gt;

<p>According to the New Hampshire Public Interest Research Group :</p>

<p>Recent graduates, especially those with low and moderate incomes, must spend the vast majority of their salaries on necessities such as rent, health care, and food. For borrowers struggling to cover basic costs, student loan repayment can create a significant and measurable impact on their lives.</p>

<p>Rising student debt threatens access to higher education as well as attempts to keep college affordable. Scholarship on this issue suggests some students are “debt averse” and are unwilling to take out even modest student loans to pay for college.6 As a result, these young people sometimes avoid college all together. Experts on student debt and college access call for further
research to determine the breadth and impact of this issue on Americans hoping to attend college.</p>

<p>They Suggest a number of solutions to address the issue of unmanageable debt:</p>

<p>Increase Need Based Grant Aid. </p>

<p>The federal Pell grant, which helps students with lower incomes, has been stagnant at $4,050 a year for the past four years, while college costs have soared. At the state level, merit-based aid programs have been supplanting need-based aid programs while the overall pool of funds remains the same. Increasing need-based grant aid will
reduce how much students have to borrow.</p>

<p>Make Repayment Fair and Affordable. </p>

<p>Loan payments should be manageable for borrowers at all income levels, and student debt should not grow unchecked or last indefinitely. Loan repayment policies must be improved so that they do not push borrowers into poverty or discourage people
from getting a college degree.</p>

<p>Promote Borrower Protections. </p>

<p>As costs rise higher than federal loan limits, students and parents are turning to unregulated private loans to fill the gap. All student loans should have fair and clear interest rates, and students and parents need basic consumer protections in the private loan
market. Lenders that give borrowers misleading information and/or charge predatory rates must be punished.</p>

<p>Establish Incentives to Control Tuition. </p>

<p>State governments and colleges that keep tuition costs low should receive financial incentives that further enable them to maximize enrollment at an affordable cost to students.</p>

<p><a href=“http://nhpirg.org/reports/payingbacknotgivingback.pdf[/url]”>http://nhpirg.org/reports/payingbacknotgivingback.pdf&lt;/a&gt;&lt;/p&gt;

2

<p>Other problems:

  1. Differing Financial Aid formulas make price comparison before the application and acceptance procedure impossible.
  2. Full price paying students may be subsidizing low price paying students. Shouldn’t subsidies come from elsewhere, expressly NOT students’ tuition?
  3. How about an ethic of voluntarily (or nonvoluntarily) repaying student loans based on the student’s, not the parent’s income? If aid is a social good, the repayments will balance out in the long run. The current system of an enforceable contract, exempt from bankruptcy laws and backed up by garnishment of social security wages, is very onerous to thinking people. Seeing endowments increase year by year with massive tuition increases doesn’t help much, either.</p>
3

<p>Having some experience with PIRG’s in the environmental realm, I place little value in their “research”. They generally have an axe to grind and will cherry pick, misconstrue or massage data to conform to their pre-determined conclusions.</p>

<p>However student loan debt is an issue that prospective students need to consider when deciding which colleges to attend and credit card debt should always be avoided.</p>

4

<p>All of these great ideas would be financed through taxpayer contributions. Unfortunately, our current administration is engaged in a very costly war in Iraq. The government is cutting benefits and not about to take on additional costs.</p>

5

<p>I would gladly have spent that Iraq $$ on student loan benefits!</p>

6

<p>I don’t think you would be able to spend that much. No one will ever know the total costs but it is many hundreds of billions.</p>

7

<p>Look at Forbes, 3/13/06, “College Aid Strategems” by Ashlea Ebeling for a great article on how schools look at families and the special antitrust exemption given to a group of NE exclusive schools called the 568 Group. Excerpts:</p>

<p>"Now that colleges have gone from merely expensive to rapacious, it’s not just average Americans who have to worry about financial aid formulas. . . What schools expect you to hock your house? There’s no complete list available, and many families aren’t aware it’s an issue. It’s the inside story of needs analysis, says Carl Buck, vice president of College Funding Solutions at Thomson Peterson’s, a publisher of college guides. . .</p>

<p>“Aid formulas, alas, are taking on some of the complexities of the federal tax code, and also give rise to the familiar phenomenon of marginal tax rates. Your marginal rate is the penalty you pay for earning an incremental dollar of income. In the most widely used private college aid formula a family of four reaches a 46% marginal rate on only $66,000 of available aftertax income, says Sandy Baum, senior policy analyst at the College Board. That is, if you squeeze an extra dollar of take-home pay out of your boss, 46 cents of it belongs to the college.”</p>

<p>Interesting. Wouldn’t it be nice to have all of this information about what this is going to actually cost up front, Parents?</p>

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<p><<<<< Recent graduates, especially those with low and moderate incomes, must spend the vast majority of their salaries on necessities such as rent, health care, and food. For borrowers struggling to cover basic costs, student loan repayment can create a significant and measurable impact on their lives. >>>>>></p>

<p>I think that when we have kids posting threads asking for our advice as to whether they should take the ‘free ride’ or take out loans for their “dream school”, we need to show them the above quote.</p>

9

<p>I agree. </p>

<p>Another interesting slant in today’s Wall St. Journal about states including NJ, CO, NM, UT, and MA requiring insurance companies to cover adult children, even up to age 30. This insurance trend is being driven in part by the amount of education debt borne by recent graduates, according to the article. The article also refers to the movie “Failure to Launch”, as an example.</p>

<p>“Health Insurers Must Cover Adult Children” by M.P. McQueen, WSJ Personal Journal, 4/11/06.</p>