As state support declines and costs go up, student loan debt soars
By Kelsey Kistner
Special to The Beacon
If you add up the amount of money spent on education, Medicare and health, and international affairs by the United States government in 2016, you would still not reach the amount of student loan debt our country currently has. There is difference of roughly $2.88 billion.
According to Student Loan Report, the national student loan debt is $1.41 trillion, and rising. There are roughly 44,000 borrowers with an average debt of $27,857 per student.
In the past decade the national student loan debt has increased by 157 percent while the average debt per student has increased by 38.6 percent.
Student debt continues to be a national issue as more students continue graduating with increasing debt. It has become harder for students, schools, and families to fund secondary education.
According to Elizabeth Petri, director of Financial Aid at MCLA, the average loan debt at MCLA in 2016 from all federal programs upon graduation is $25,975, with roughly 1,000 borrowers. These numbers do not include debt accrued from private loans.
Students in the News Writing and Reporting II class conducted an informal and unscientific survey of 44 seniors for this story. Seventeen students, or 38.6 percent, have between $20,000 and $30,000 in loans while 18.2 percent have between $10,000 and $20,000.
Seven students, or 15.9 percent, have between $1,000 and $10,000 in loans. The same amount of students, 4.5 percent each, have between $30,000 and $40,000 and zero in loans. Nine percent have more than $40,000 in loans while another nine percent do not know how much debt they have.
Mark Kantrowitz is an expert on student loans, financial aids, and scholarships. His research and published work is recognized nationally. He is the president of MK Consulting Inc. and founder of FinAid, a website dedicated to student aid information and advice.
There are two major factors driving the rise of student debt, Kantrowitz told The Beacon in an interview. First is the long term declining support from the federal and state governments. On a per student constant dollar basis there is a failure of grants and states to keep pace with cost demands.
“When you have cuts in federal and state support you have a couple of consequences,” Kantrowitz said. “One is when state appropriations go down, you have tuition go up. Another is that it shifts the burden of paying for college from the federal and state government to the families.”
According to the Massachusetts Budget and Policy Center (MBPC), from 2001 to 2016 Massachusetts state university funding has decreased by $2,700 per student while state university tuition and fees increased by $4,700.
This decrease in funding and increase in tuition and fees are causing students to pay a larger portion of the college cost on their own.
In 2001 students from Massachusetts state universities, the UMass system, and Massachusetts community colleges paid roughly 30 percent of the college cost. In 2016 students from state universities paid 61 percent, UMass students paid 56 percent, and community colleges paid 55 percent of the college cost, according to MBPC.
Second is families do not truly evaluate if the debt they are taking on is affordable. Kantrowitz believes this is because families are told student debt is good debt, as it is an investment for the future, and some colleges make it difficult for the families to determine how much they need to borrow and what the college truly costs.
He explained that colleges will characterize loans as reducing the cost, when they just spread them out over time. They say it makes it more affordable to pay the bill, but the long term consequences of graduation debt are not discussed in detail.
“I think there needs to be better counseling for borrowers,” Kantrowitz said. “The problem is if the colleges, in some cases, provide good counseling they are acting against their own best financial interest. So there is a conflict between the best interest of the student, the best interest of the college, and the best interest of the lender.”
His analysis suggests one in six bachelor degree recipients are graduating with excessive debt, which is more debt than can be repaid in 10 years. Excessive debt occurs when the total debt at graduation exceeds the annual starting salary.
Kantrowitz concludes excessive debt is a matter of choice rather than a necessity. He recognizes that students are not forced to take out so many loans or choose an expensive school.
Another important factor to consider is the rise in the cost of college. The price of higher education on average has increased over 500 percent in the last 30 years. As prices rise students inevitably have to borrow more to attend.
Going to a public school is the most fundamental ways to reduce student debt. However, it has become harder for state schools to support their students.
Petri explained MCLA competes for state money with the other state universities. The government determines the total amount of money given to higher education, and each university receives a percentage based on a funding formula.
“I tell people we run like a home budget,” Petri said. “Sometimes you’re flushed and get extra money and you can do a few more things, and then sometimes the state cuts the budget so we have to pull back and can do less for our students.”
When state schools see cuts from the federal and state governments, students are forced to take out more money in the form of private loans. These loans hold high interest rates that can force students to pay back nearly double of what they borrowed.
Direct subsidized and unsubsidized loans for undergraduates currently have a 3.76 percent interest rate. Graduate or professional students taking out a direct unsubsidized loan currently have an interest of 5.31 percent. Direct PLUS loans have a 6.31 percent interest rate. Interest on private loans differs for each provider.
For Elsa Mastico, who will be graduating in December, cost was a huge factor in her college choice.
“I was going to go to Clark University originally,” she said. “They gave me $4,000 and its almost $50,000 a year, while MCLA is [about] $20,000 and I got roughly $10,000. So the choice was very easy.”
The $10,000 includes loans and scholarships. Mastico predicts she will have roughly $20,000 in debt after graduation.
“I am mostly worried about finding a job after I graduate that will help me pay off my debt,” she said.
Students pursuing education past their bachelor’s degree face adding a substantial amount of money onto their debt.
Monica Vogel, a senior at MCLA, will be attending Purdue University’s College of Veterinary Medicine after graduation. She was given an estimated $180,000 debt amount from the university, not including interest.
After she has completed the veterinary program, she will have acquired roughly $195,000 in debt (before interest) from MCLA and Purdue University combined.
“In the veterinary field [student debt] is a huge issue because you are one of the less paid professions,” Vogel said. “You have to really want it.”
Vogel explained that the entirety of her costs will be covered through loans. The university advises students do not work because of the program difficulty. Although she plans on applying for scholarships, Vogel is not hopeful on its contribution.
“The scholarships are so far and few between, and highly competitive that its almost not worth it,” she said.