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As Expected, Federal Loan Borrowing Has Increased

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The US Department of Education’s Stats in Brief from October 2011 entitled “Borrowing at the Maximum” investigates the percentage and demographics of students who take out federal subsidized and unsubsidized Stafford loans, and how this has changed over time. The report also seeks to differentiate between those who take out the program maximum loan amount and those who take out their personal maximum amount (adjusted for their financial need and the cost of their education). Some interesting findings include:

  • the proportion of borrowers has increased significantly over time, from 27 percent of students receiving federal Stafford loans averaging $7,200 (inflation adjusted) in 1989/90, to 46 percent borrowing an average of $10,300 by 2007/08.
  • 43 percent of those borrowing in 2007-08 took out the program maximum Stafford loan amount, while 60 percent took out their personal maximum amount (which can equal the maximum amount for some).
  • 30 percent of those taking out Stafford loans also took out private loans, whereas only six percent of students not taking out federal loans did. Furthermore, 16-18 percent of the parents of those students borrowing through the Stafford program also took out Parents PLUS loans.
  • Students taking out Stafford loans to help finance their education were less likely to have full-time jobs.
  • 73 percent of students who took out Stafford loans also received grants.

To read more about the findings or methodology of this report, check out the full report here.

New Report Shows Strategic Budget Cuts in Higher Ed

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The Delta Cost Project has published its latest Trends in College Spending report. This year’s version reports on revenue and spending trends in higher education from 1999 to 2009, the latest year of IPEDS data available at this time. As such, this version includes the first year of the recession’s impact on higher education finances.

Overall, the report confirms several already noted trends:

  • The resource gap between public and private institutions continues to grow, and is now so wide that competition between the sectors is virtually impossible (see Figure 22 on page 43 of the report linked above for a stark depiction).
  • At public institutions, the share of education related spending derived from tuition revenue has increased dramatically, surpassing the contribution from state appropriations at a number of universities, including the UW.
  • At public institutions, tuition increases in 2009 represented cost shifting from the public to the student and not increases in institutional spending.
  • At public institutions, administrative and maintenance spending remained flat or declined while spending on instruction went up slightly, indicating that, unlike previous recessions, institutions are making cuts more strategically to help protect the core academic mission.
  • Whether from improved retention or decreased extraneous course-taking, student credit hours per degree appear to have decreased between 2002 and 2009, which is one measurement of efficiency.
  • At public institutions, faculty salaries have been very flat as the cost of benefits have, on average, risen by over 5 percent per year, now accounting for almost 1/4th of all compensation costs.

Overall, this report does a great job of making it clear that the majority of students attend relatively affordable, cost-effective public institutions in the United States, even though a small number of pricey private institutions dominate the public perception. It also places revenue and expenditures in the context of student enrollment and the spectrum of university activities.

One issue we have consistently had with this report is the calculation of what is called the ‘subsidy’, an attempt to measure overall cost by combining various forms of institutional revenue with state appropriations and contrasting that with tuition revenue to determine what portion of overall cost is paid by the student and what portion is subsidized for the student. Our concerns with this measure were detailed in an earlier blog post and brief, if you are interested.

Higher Ed Budget Cuts in WA Among Highest in the US

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The American Association of State Colleges and Universities’ (AASCU) July 2011 State Outlook confirms that most states cut higher education spending for fiscal year 2012. For some states, this is the third or even fourth consecutive year of higher education spending cuts.

Also unsurprising, AASCU identifies the 23 percent funding cut for higher education in Washington as the second highest in the country (behind a 24 percent cut for such spending in Arizona, and equal to a 23 percent cut in California). That cut, combined with previous reductions, mean that the University of Washington has lost half of its state funding in just four years.

A New Measure for College Success?

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Education Sector, an education policy think tank, recently released a report entitled “Debt to Degree,” which measures the ratio of student and parent, government-backed loans taken by students to the number of credentials awarded by an institution per year.  Based on this, the report concludes that:

  • Across all institutions and sectors, for each degree awarded in 2008/2009, $18,102 was borrowed
  • Degree to credential ratios varied considerably across institution types:  On average, families at four-year public institutions borrowed $16,247 per degree, compared to $21,827 at private four-years, and $43,383 at for-profit schools
  • Among elite research universities, Princeton, with its no-loan financial aid policy, had the lowest debt to credential ratio ($2,385), while NYU had the highest ratio ($25,886), due to its small endowment and less wealthy student body
  • Washington state has one of the lowest borrowing to credential ratios in the nation, with debt to degree ratios in the $5,000 to $9,999 range

Note that the study excluded private loans and Perkins loans, which some argue might mask even larger debt burdens, particularly at for-profit schools where institutional financial aid is limited. To read more about the study, including its limitations, check out the Chronicle’s and Inside Higher Ed’s articles.

Low Debt to Income Ratio for College Grads in WA

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Kiplinger has released a map showing average student debt versus average income across all fifty states, as well as categorizing institutions they have identified as the most expensive and the ‘best values’.  The UW comes in as the 10th best value public institution in the nation for 2010-11.

The map illustrates that Washington state students have a relatively low debt to income ratio: Average student debt is between $15,000 and $20,000, while average income is around $40,000 to $50,000, with about 61 percent of all students in the state taking out loans. Utah boasts the smallest amount of debt per student (under $15,000), while New Hampshire has the highest average debt load (over $25,000 per student).

These state level data are consistent with our most recent UW data. In 2009-10, 50 percent of all UW undergraduates borrowed and their average cumulative debt was $19,500. Although these figures are lower than the national average, they have increased over the last several years, especially as state funding cuts have necessitated tuition increases. This is why the UW Board of Regents voted to substantially increase the UW’s commitment to financial aid for resident undergraduate students starting this fall.

Note that Kiplinger also shows that students appear to be increasing their use of credit cards while in college, with 84 percent of students holding at least one credit card and half of all students holding four or more. The mean credit card balance was a record $3,173.

PELL Grant Program Left Intact For Now.

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If the US House and Senate approve the debt deal that the Obama Administration and Congressional leaders seem to have worked out over the weekend, the Pell Grant Program will remain intact. Although PELL had been targeted for significant cuts, the deal leaves the current maximum grant at $5,550, and retains the in-school interest subsidy for graduate student loans.

Note that future cuts are still possible, especially if the number of eligible students continues to grow, increasing significantly the cost of the program. But, for now, the bipartisan support to leave the program largely untouched is encouraging. Make sure to follow frequent updates on the debt deal, federal budget negotiations and other relevant federal activity on the UW Office of Federal Relations blog.

UW Remains More Affordable Than Most Peers

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As of July 15, all UW Global Challenge State Peers had approved resident undergraduate tuition increases for the upcoming 2011‐12 academic year. See the latest OPB brief for details.

Despite implementing a 20 percent tuition increase for resident undergraduates, the University of Washington, which has consistently ranked as the least expensive among the GCS peers, will continue to rank in the bottom third of the peer group in 2011‐12.

Spending on Financial Aid Increases in Most States

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The National Association of State Student Grant and Aid Programs (NASSGAP) has published their Annual Survey Report on State-Sponsored Student Financial Aid.

The new report, based on 2009-10 survey data, shows that while state support for institutions has fallen rapidly for several years, many states have increased their commitment to students via financial aid. On average, state spending on financial aid increased 3.8 percent between 2008-09 and 2009-10. For many states, increases in financial aid were necessary to help maintain student access as steep budget cuts for institutions necessitated significant increases in tuition.

Note that the survey does not contextualize increases in spending on financial aid with tuition increases, nor does it specifically address changes in financial need for students during the Great Recession. Inside Higher Ed addresses some of these issues in their report on the survey.

The survey also shows that while most state spending on financial aid continues to be in the form of need-based grants ($8.9 of $10.8 billion was spent in the form of grants), state spending on merit-based or mixed merit and need based financial aid programs continues to increase. The survey shows that 47 percent of all state aid to undergraduates is need-based, while 18 percent is merit-based, and 35 percent is tied to programs with both need and merit-based components.

UC Likely to Raise Tuition Again

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Having already increased tuition by 8 percent for the upcoming academic year, UC Regents are expected to consider an additional 10 percent increase due to the Governor’s failure to win extension of various temporary tax measures in California. As a result, the overall cut to the University of California has been increased from $500 million to $650 million (equaling a 21 percent cut in state funding for UC), which is expected to increase further if an agreement on revenue measures is not reached.

The latest talk of another tuition increase for resident students comes as the UC system has been increasing nonresident enrollment to help make up for state funding cuts.

US Department of Ed Publishes College Affordability Data

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When Congress renewed the Higher Education Opportunity Act in 2008 it contained some significant revisions, including new mandates to increase transparency around the issue of college cost and affordability. As a result, all institutions were required to develop and publish some form of a ‘net cost calculator’ that could help a prospective student get a sense of what the student and their family might have to pay to attend the institution once their basic financial circumstances were taken into account. At the UW, we refer to this as our Financial Aid Estimator Service.

In addition, the US Department of Education was charged with collecting, analyzing and reporting specified information about sticker price, net cost, cost increases and more via an easily accessible public website. Just last week, the Department published that website. Most of this information was already publicly available via the National Center for Education Statistics (NCES), but the new site focuses on enhancing understanding and navigability for citizens.

The creation of this website is a step forward for citizens seeking more coherent information on college pricing, but the site and data have some already clear weaknesses that will hopefully be addressed.