Student debt report: More graduates have it ... and have more of it

The average debt for four-year college graduates in the US is creeping up to the $30,000 mark, and in some states has already surpassed it.

Among the class of 2012, 71 percent graduated with debt – and of those, the average burden carried forward was $29,400, estimates the Project on Student Debt at The Institute for College Access & Success (TICAS), a nonprofit group with offices in Washington, D.C., and Oakland, Calif. That’s up from 68 percent indebted in 2008, with the average debt rising about 6 percent a year.

The report comes at a time when college affordability is high on many people’s agendas. President Obama has proposed a college rating system to highlight affordability and value, and discussions are under way in Congress and among higher education institutions about how to rein in costs and the growing reliance on student loans.

“Despite discouraging headlines, a college degree remains the best route to finding a job in this tight market. But students and families need to know that debt levels can vary widely from college to college,” TICAS president Lauren Asher said in a statement Wednesday.

One sign of the continued value of college: The unemployment rate for those with only a high school degree in 2012 was more than double the unemployment of those with a college degree (17.9 percent versus 7.7 percent).

But the burden of loans is too high, many economic and education policy advocates say. “Student loans used to be a symbol of ‘good debt’ … but that’s not necessarily the case anymore, and it’s having a significant impact on broader economic activity,” such as graduates’ ability to buy cars and houses, says Zakiya Smith, a strategy director at the Indianapolis-based Lumina Foundation and a former education adviser in the Obama administration. 

About 20 percent of student debt is now through private loans, a portion that leaders of The Project on Student Debt would like to see reduced. “If you need to borrow to get through school, federal student loans are the safest way to borrow,” Ms. Asher said.

The report includes state-level comparisons based on voluntary reporting by a large portion of public institutions and private, nonprofit colleges. It also lists highest-debt and lowest-debt colleges.

While estimates for the debt of students graduating from for-profit institutions were included in the national figures above, not enough of those schools reported voluntarily to be included in the more detailed analyses. (Using other data sets, the report estimates that for-profit graduates borrow 43 percent more than graduates from the other types of colleges.)

States with the highest level of debt among graduates of four-year public and private nonprofit colleges are Delaware, New Hampshire, Pennsylvania, Minnesota, and Rhode Island – all above $30,000.

The lowest-debt states are New Mexico, California, Arizona, Nevada, Wyoming, Utah, and Tennessee – all below $22,000.

Average debt at the individual college level ranged from $4,450 to $49,450. Many of the high-debt public colleges listed in the report enroll a large portion of low-income students.

The list of low-debt institutions includes several “work” colleges (Berea College and College of the Ozarks), several schools with high endowments, one Ivy League institution that promises to meet all student need through grants and work on campus (Princeton University), and several schools that serve many low-income students.

One way to reduce debt would be to increase the maximum federal Pell grants for low- and moderate-income students, which is currently $5,645 a year. The report recommends doubling that.

The report also includes less costly recommendations, such as allowing students to apply earlier for financial aid and improving tools to provide better consumer information. For instance, most colleges are required to post online “net price calculators” to help prospective students estimate true costs of attendance, but many are hard to use and compare with other schools.

The federal Department of Education should also collect better data on student debt and outcomes after college, the report urges. “The success of the president's proposal to rate colleges based on access, affordability, value, and student outcomes will depend on the quality of the data used in the ratings, underscoring the urgency of gathering better information," TICAS research director Debbie Cochrane said in a statement.

On Wednesday the Department of Education announced a new Financial Aid Toolkit that gives guidance counselors and other student advisers an easier way to search college aid resources.

Education Department officials have also been seeking input from parents, students, and college leaders about how to implement the president’s college ratings plan. This week, the department is putting out a formal request for experts and researchers to weigh in.

This fall, the Senate Health, Education, Labor, and Pensions (HELP) Committee has been holding hearings to examine financial aid, college accountability, and other issues as Congress moves toward reauthorizing the Higher Education Act.

Sens. Chris Murphy (D) of Connecticut and Brian Schatz (D) of Hawaii announced recently that they plan to propose a bill that would give incentives to colleges to innovate with an aim of lowering costs, would create an accountability commission to set standards for higher education institutions that receive federal aid, and would establish rewards for colleges that perform particularly well against those standards.

“We need college administrators to wake up every day thinking about how they’re going to bring down the cost of college for students,” Senator Murphy said in a statement.

More information on the TICAS report, including an interactive map, is available here.