NOVEMBER 18, 2013
Resources for Managing Student Loans
Paul Combe, American Student Assistance (7:02)
Interview with Paul Combe (12:58)
Vicki Jacobson, Center for Excellence in Financial Counseling (5:46)
Marilyn Landrum, Missouri Department of Higher Education (3:58)
Resources for Economics and Personal Finance
Mary C. Suiter, Federal Reserve Bank of St. Louis (3:10)
What We Know About Student Loans in the Eighth District and Nationwide
MODERATOR: William R. Emmons, Federal Reserve Bank of St. Louis (4:14)
Bryan J. Noeth, Federal Reserve Bank of St. Louis (13:53)
Kelly D. Edmiston, Federal Reserve Bank of Kansas City (9:17)
Caroline Ratcliffe, Urban Institute (14:22)
Research Panel Discussion (35:46)
The Future of Student Loans and Financing Higher Education
MODERATOR: Ray Boshara, Federal Reserve Bank of St. Louis (7:32)
Sandy Baum, Urban Institute and George Washington University (11:06)
Interview with Sandy Baum (7:23)
William Elliott III, University of Kansas (13:12)
Jen Mishory, Young Invincibles (8:37)
Interview with Jen Mishory (8:01)
Gary A. Ransdell, Western Kentucky University (11:35)
Roundtable Discussion (40:21)
Below is a full transcript of this video presentation. It has not been edited or reviewed for accuracy or readability.
Gary A. Ransdell: Thank you. Well, good news and bad news. The good news is I’m the last on the program. The bad news is it’s going to be hard to say something that hasn’t already been said, but I’ll try to put a little different twist on it. I’m coming from the perspective of the President of the university of 21,000 students, a public university, with annual over 100 million dollars in loans when you combine Stafford loans, Perkins loans, parent loans, and loans from outside lenders, and over 8,000 students that are Pell eligible with over 30 million dollars in Pell Grant money coming to our students in any given year. So I’m going to kind of be schizophrenic here, and talk about the problem a little bit that’s kind of been touched on throughout the afternoon, and also the value. So if I’m going to talk about the problem, I’m going to talk about the importance of sustaining that problem in some fashion or another.
And I do want to give credit to the “Time to Address Student Debt”; a publication of the American Student Assistance Program. We heard from some of that organization a little bit earlier. But in thinking about what to say today, I ran across a publication by, I call it, “A Time to Address Student Debt,” and I was struck by a lot of the information contained in it. And then I’m going to go over some information that I found in the Wall Street Journal just last week in the November 11th edition of the Wall Street Journal.
But yes, the average student debt per borrower is going up at an accelerated pace; $16,000 in 2005, over $25,000 in 2012. Yes, 60 percent are graduating seniors in 2011 had student loan debt. Yes, the rising levels threaten the economic ability of younger Americans. Yes, student debt has tangible long-term effect on both the students who incur the debt and the institutions they attend. It can affect an institution’s enrollment, and many institutions are facing enrollment declines this year, and that’s a pattern that has the attention of a lot of institutions. And it can affect student retention. Yes, 2.3 percent fewer students were enrolled in campuses across America from last year to this year. Yes, 29 percent of college students with loans leave school before degree completion, causing institutions to take a significant financial hit in lost tuition revenue. Yes, more than 10 percent of alumni donate to their alma mater, but when their debt is between 30 and 40,000 dollars, alumni giving is less than three percent, which is significant less than alumni giving in general. Delinquency rates are a significant concern as 30 percent of student loans that are subject to repayment or over 90 days overdue. And, yes, the numbers that we’ve seen throughout the afternoon are inflated by higher debt value at profit and for-profit institutions than in public institutions. And I’ll get into some of that data in a minute.
Now, to turn to the value, and this is the schizophrenic part. It’s worth noting, however, that college loans are an enabler for millions of students to obtain a college degree in the first place. Many of these students could not otherwise pursue such a goal. As serious as the growing debt in related delinquencies are for higher education and for our national economy, the value of student loans outweighs the problems associated with them. Far fewer students would be accessing a higher education were it not for the availability of student loans. The data largely assembled by the various district banks of the Federal Reserve, some of which we’ve seen today, clearly indicates the value of completing a college degree. Lifetime earnings are significantly greater for those who complete a college degree as compared to those who have some college but failed to graduate and those who complete only a high school education, or worse yet, neither college degree or high school education. And unemployment rates are also considerably higher for those who fail to finish. You can pick the perfect school in terms of courses, location, price, campus character, but none of that does a student much good if she—or does not end up completing in the degree. Some college is better than no college, because of the lessons learned, but the difference between some college and an earned degree is huge over the course of one’s earning future.
The point is that students who finish are in a better position to repay their student loans. Perhaps the most significant point however, is that the worst debt that has occurred is that debt owned by students who failed to finish, and therefore, are less competitive in the job market. One of the most painful things for me as a university president is to watch students incur significant debt and fail to finish, and therefore are not likely to be in a position to cover their debt, or support their families in a manner in which they might otherwise be able to do so had they completed their college degree.
And some of the information that I got out of the “Time to Address Student Debt” publication calls me to think a little bit about some of the things we may not be doing on our own campus in order to—this thoughtful suggestions that that publication made that we can be doing a better job of in higher education. We can do a better job providing our matriculating students with the financial principle skills and information that helped make college cost more manageable and also helped existing students stay in school to complete their degrees. We communicate with students, but it’s often more on an individual basis than a broad basis. And I worry about all of the students with whom we may not be communicating information about good financial principles and skills. We need to engage with students as early as possible so that they can understand their financial aid options, learn solid money management practices, and get started on a successful track, which exhausts all non-loan financial aid and scholarship possibilities before incurring college debt. That’s easier said than done. When you’re dealing with 4,000 freshmen, it’s hard to communicate with the majority of them in any meaningful way. We need to do a better job providing our students with a holistic approach to understanding and managing debt, help them through graduation and beyond. And this needs to start when enrollment begins in the freshmen year, and communication that continues through graduation and beyond. And we need to communicate with and empower our current students to better understand their loan options. Help them understand the importance of staying on track through payments, and learn sound money management skills, and hopefully to reduce delinquencies and defaults and helping our institutions maintain eligibility to participate in certain federal loan programs. And it certainly has our attention as we engage our students. The more we can do that, the more we maintain eligibility for what we want our students to understand.
Some of the slides I want to go through you’ve seen earlier today, and you can see the numbers here, and student loan default hitting a 15 year high. We’ve talked about that, and we had some golden years there eight or ten years ago, but those times are changing. And we’ve talked about for-profit institutions, but I want to accentuate the differences in for-profit private and public institutions, and the for-profit variable has our attention as public institutions, and how that is skewing the data; much of which we have talked about here today. And you can look at this slide and see the percent of defaulters, and how much that blue margin is growing for for-profit institutions.
I want to also talk about major choice. When we talk about sweat student study, that can lead the jobs, and help them repay their student loans. This is information from the Wall Street Journal that suggests different majors, and what students are majoring these days, and then you can look at what employers are seeking. And when you talk about what makes students employable? This is what employers are telling the Wall Street Journal in terms of what they look for in the skillsets for students they want to hire, and look where the college GPA, and in fact, even college major is in terms of what employers are seeking. And it’s important for our students to understand some of these things as they look to be employable, to be able to repay their student loans. And then in terms of majors, who’s hiring, in terms of lowest unemployment rate, and the highest unemployment rate. And these are factors that are important for institutions to understand as we guide students into what courses of study. Although, I might maybe take some issue with directing students into majors that lead to jobs, because I worry as an educator about the importance of the ability that they can reason, the ability to make sound decisions, self-confidence, self-esteem. Things that employers tell us they’re looking for, but to lead and inspire, and it calls people to do things they did not otherwise think possible. The determination, other soft skills that employers say they’re seeking. So it’s important that we continue to emphasize for our students, get the skillsets that are going to lead to jobs. And it’s not just about what you study, but it’s about what you get from that college education that employers are seeking that go way beyond what you get in your chosen discipline. But that’s often a difficult thing for colleges to sell.
Information you’ve seen earlier today; total earnings in terms of degree attainment levels. So clearly, completing the degree, if you look at this chart, is so much difference in terms of lifetime earnings for those who finish versus those who fail to finish. And again, unemployment rates significantly greater for those who actually complete the degree than some college, high school, or less than a high school diploma. And this is information provided by the St. Louis Federal Reserve Bank staff.
So I could go on, but I’ll really get redundant in a hurry here. But student loans are a problem, but boy, they are sure essential to an institution who has an awful lot of its students depending on student loans to complete a college degree. And even those who fail to complete a college degree, some college is better than no college even if you have to repay that loan. But your likelihood of repaying is a lot less if you fail to finish.
Ray Boshara: Great. Round of applause for our initial round of presentations. Thank you very much.