Indiana

Education, From The Capitol To The Classroom

How Student Loan Debt Could Undermine 'The College Completion Agenda'

Kyle Stokes / StateImpact Indiana

Junior Kate Lavery says she's unsure whether she'll be able to finish her sociology degree from IU because of her debt load. It largely hinges on whether her parents are approved for a federal college loan next year.

Money was tight in Kate Lavery’s house growing up. But when it came to choosing a college, her parents told Kate not to worry about the money — advice that squared with what she heard in high school:

“Go to college, get your degree, so that you get a good job so that you can pay off those loans,” Lavery remembers. “We always knew the loans were going to be there, but we never sat down and said, ‘This is the figure.’”

Now a junior at Indiana University, Lavery’s now more than $100,000 in college debt. It’s an exceptional case, by the numbers, but neither Kate nor her parents are comfortable saying whether she’ll be able to finish her sociology degree next year.

The level of sticker shock attached to college debt is becoming more worrisome to higher education policymakers, who’ve set lofty goals for increasing college graduation rates at a time when Americans owe more on their student loans than they do on their credit cards

Debt And ‘The Completion Agenda’

Think about the goals set by the Lumina Foundation, for instance.

“Taking out debt to pay for a portion of school… might actually help a lot of people enroll in college. But it’s when that debt burden hits that tipping point where it becomes unmanagable, it becomes burdensome, it becomes inequitable for certain borrowers, then you start to have a problem. That’s what we’re starting to see.”
—Nick Hillman, Univ. of Utah professor

The Indianapolis-based, privately-funded education research organization has been at the forefront of a nationwide push to get colleges to increase their graduation rates and over the next decade, known generally as “the completion agenda.”

Lumina says policymakers and colleges have to figure out how to raise the rate of Americans holding college degrees — currently at roughly 39 percent — to 60 percent by 2025. That means more than 23 million more people would have to go through college in the next 12 years.

Lumina hasn’t had a hard time selling this agenda to state and national lawmakers. But stories like Kate Lavery’s — and statistics from the Federal Reserve that student loan debt has multiplied five fold in the past decade — have prompted anxieties that the country’s burgeoning student loan burden could become a roadblock to meeting Lumina’s lofty goals.

“Availability [of higher education] has a lot to do with it being affordable,” says Dewayne Matthews, Lumina’s vice president of policy. “The student debt issue certainly is a big piece of the affordability question — it intersects it in a lot of different ways.”

Nick Hillman, a professor of higher education policy at the University of Utah, says debt can be a barrier for students “to even consider going to college.” As we wrote Thursday, Hillman told StateImpact:

We’ve moved away from a system of grants to one of loans and tax credits. This is a demonstration of our policy values where we want to put more of the responsibility on the individual students, so taking out debt is becoming an expected thing to do.

It might not be a bad thing. Taking out debt to pay for a portion of school might not necessarily be a bad public policy option, it might actually help a lot of people enroll in college. But it’s when that debt burden hits that tipping point where it becomes unmanagable, it becomes burdensome, it becomes inequitable for certain borrowers, then you start to have a problem. That’s what we’re starting to see.

‘If We Can’t Make It Work, We Will Tell You’

Growing up in the suburbs of Boston, Kate Lavery says she had always wanted to go away from home for school. While she applied to an in-state school, Lavery also looked at colleges in Seattle; Albuquerque, N.M.; even Montréal.

Even after her dad lost his job in a corporate buyout, Kate’s parents told her not to “overanalyze the finances.” They promised her they’d pay for her undergraduate education — a promise they wouldn’t break lightly.

“Go where you want to go,” Kate remembers them telling her. “If we absolutely cannot make it work, we will tell you.”

In 2009, Lavery enrolled at Loyola University in Chicago — a private school, but scholarships helped reduce the costs.

When Loyola’s tuition increased before her junior year, Lavery transferred to Indiana University. Tuition was slightly cheaper at IU, the academic programs were stronger, and she was still close to friends and contacts in Chicago.

But IU didn’t offer her the scholarships Loyola did. (She is an out-of-state student; IU administrators point out 70 percent of Indiana resident undergrads receive some gift aid.) Then, a few weeks before starting classes in Bloomington, Lavery’s parents were denied for a PLUS Loan — a federal college loan for parents.

Lavery’s parents were behind on their credit card payments. After catching up, the PLUS loan was approved, but it was a reality check for everyone. Kate remembers going to her first fall classes at IU not knowing whether she’d be able to finish the semester.

Kate says she doesn’t regret her college choice, even though she knows a school in Massachusetts would’ve been cheaper. But she does wish she would have understood the finances better before she started school.

(Not Yet) At A Breaking Point?

Indiana University treasurer MaryFrances McCourt says administrators want to help students better understand the burden of student loans. Among the ideas they’re considering is a plan for ramped-up financial aid counseling with students who are struggling academically.

“If you are borrowing to help pay for your education, you really have an almost even greater need to complete, because otherwise you’re then saddled with debt and you don’t get the benefit of the education in helping you pay back that debt.”
—Dewayne Matthews, Lumina Foundation

If a student isn’t doing well enough to graduate on time, McCourt says, “that means you step up your counseling with that person. What decisions are you making that are shaping your academic progress and what decisions are you making that are causing you to take on this much debt at the same time?”

McCourt says the university is also considering including financial aid counseling in freshman experience seminars.

That said, McCourt isn’t convinced student debt will prevent Indiana’s colleges from meeting the goals organizations like Lumina are setting. While she knows many students are living “reasonably,” she also says she sees a lot of students racking up expenses outside the classroom.

“There are a lot of cars, there are a lot of nice apartments going up, there are a lot of dinners out. There’s a lot of non-student lifestyle” fueling student debt, McCourt says.

Indiana Commission for Higher Education documents show Indiana offers more need-based financial aid than almost any other state.

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