AID WITH INTEREST
More than half of undergraduate student aid at OSU is borrowed
By Encarnacion Pyle THE COLUMBUS DISPATCH
CHRIS RUSSELL DISPATCH Adam VanLuit, a senior political science major at Ohio State University, studies in the computer lab at the Ohio Union. After graduating in the spring, he plans to take a year off to earn money before going on to law school.
Loans make up more than half of the financial aid to Ohio State University students, and a greater number of graduates are struggling to pay them back in a weak job market.
The biggest burden falls on thousands of middle-income students. In the 2010-11 school year, loans made up 80 percent of the aid for in-state undergraduate OSU students who reported that their parents made $75,000 to $149,999.
In 2010-11, OSU students borrowed more than $217 million, a 24 percent increase over five years earlier, according to a Dispatch analysis of more than 500,000 student financial-aid records at Ohio State’s Columbus campus from 2006-07 to 2010-11, the latest available figures. The data did not include student names or other personally identifiable information.
- Students in the middle-income bracket borrowed an average of about $9,000 in 2010-11, which could easily add up to between $36,000 and $54,000 in debt, depending on how long it takes them to graduate. That’s far greater than the school’s reported average debt of $24,840.
- Middle-income parents are being squeezed from all directions, including higher costs of living and property taxes, lower home equity and retirement savings, stagnant salaries and rising college costs, said David Montesano, a college-admissions expert with College Match Educational Consulting Services in Seattle.
“Families who have achieved the so-called American dream with a modest home, two cars in the garage and enough money to get a Starbucks latte every day are more frequently finding that they can’t afford to send their kids to college ,” he said.
Making ends meet
Courtney Palma, 26, of the Far West Side, will leave Ohio State with more than $40,000 in federal and private loans when she graduates this spring with a major in social work.
When she was in middle school, her grandmother became ill with pancreatic cancer and her mother quit her job to care for her.
Her parents drained Palma’s college-savings account to pay her grandmother’s medical bills and then, funeral expenses. Her other grandmother later got sick, and her parents divorced — leaving them unable to help with college.
Palma attended Bowling Green State University for her first two years of college before transferring to Ohio State. Unable to balance a full-time job and school, she took a lighter course load. Still unable to keep up with her bills, Palma took a quarter off.
Things have been smoother since Palma got married in May 2011 because her husband, a logistics manager, has helped with her tuition and fees. “We’re far from well off, but we’re making ends meet,” she said.
She would like to get a master’s degree but needs to save money first. If she’s lucky, she’ll find a job that has tuition assistance. Palma eventually hopes to work with children and families, homeless people or ex-offenders, but those jobs are often low-paying.
“It will be heartbreaking if I find my dream job and I can’t take it because it doesn’t pay enough for me to pay off my student loans,” Palma said.
KYLE ROBERTSON DISPATCH Ally Maiz, a freshman from Illinois, chose Ohio State University because it had the major she wanted — molecular genetics — and offered her the most financial aid. It also was the cheapest of the four out-of-state schools to which she applied. Behind her is the Wexner Medical Center.
- OSU officials say the university has had to increase tuition to offset shrinking state support and not compromise efforts to become one of the nation’s top 10 public universities. State aid currently accounts for about 7 percent of Ohio State’s $5 billion annual budget, down from 25 percent in 1990.
- At the same time, OSU officials said they have been increasing institutional aid to students to help make school more affordable. In 2010-11, Ohio State gave out $121 million in institutional grants and scholarships. That’s a 25 percent increase over 2006-07.
Tuition and mandatory fees alone at Ohio State are now $10,036 a year for an undergraduate from Ohio. Tuition, mandatory fees and room-and-board costs at Ohio State have increased about 70 percent, from $11,910 in 2002-03 to $20,221 this school year. Add books, other fees and other living expenses, and the annual sticker price jumps to $26,871, based on OSU estimates.
Still your best bet
Many advocates say that as debt rises, fear of loans can prevent some students from getting the education they need to succeed in life.
“In these tough times, a college degree is still your best bet for getting a job and decent pay,” said Lauren Asher, the president of the Institute for College Access & Success, which runs the Project on Student Debt.
- College graduates earn an average of $1 million more over a lifetime than people with just a high-school diploma. But Asher understands why students, and their families, are discouraged.
- “In 1980, a student working a full-time, minimum-wage job during the summer could earn almost double the average tuition and fees at a public four-year college,” she said. By 1990, such a job covered a little less than the cost of tuition and fees; in 2000, about three-quarters; and in 2010, only about half.
Others worry that increasing costs are forcing some students to choose majors based on their income potential, instead of following their passions. “It’s almost a sin to have your kid want to be a dancer these days,” said Montesano, the college-admissions strategist.
Ally Maiz, 18, of Bartlett, Ill., near Chicago, wanted to go to the University of Michigan because her mother’s family is from Michigan.
But when she learned that the total cost would be close to $55,000 a year, she decided on Ohio State, which has her desired major — molecular genetics — as well as a big-city campus and a winning sports program.
- At a total cost of $40,000 a year, Ohio State was also the cheapest of the four out-of-state schools to which Maiz had applied, and it offered her the largest aid package — $12,000 in scholarships.
But even that is not enough for her to graduate without significant debt.
Maiz’s father, a computer engineer, has been able to pay two-thirds of her freshman year at Ohio State with a college-savings account he set up when she was a baby. But her mother, a firefighter, has borrowed about $9,000 in federal PLUS loans. Maiz said there’s probably enough in her college account to pay for only one semester next year, which means her parents will likely have to borrow the rest.
Maiz expects to borrow hundreds of thousands of dollars after she graduates from Ohio State to go to medical school. Although that frightens her, she said it’s what students have to do if they want to be successful. She’s more worried about what will happen if college costs aren’t reined in before she has her own family:
“Is it going to cost $100,000 a year to send my kids to college? Will I still be paying off my own student loans then?”
More OSU students are turning to loans because federal loan limits were raised in 2008-09, making them more accessible, said Diane Stemper, OSU’s director of student financial aid. A lot of families’ disposable income also dropped or went away entirely because of the recession. And home-equity lending dried up as home values fell, leaving many families with few other options.
- In 2009, state lawmakers also cut Ohio’s main need-based scholarship program by about half, further pinching students, Stemper said. Lawmakers have continued to shave away at the program ever since.
Having $8,000 or $9,000 in loans suggests that many OSU students are borrowing from private lenders or that their parents, like Maiz’s, are taking out federal PLUS loans to supplement their children’s aid packages, both of which can have their dangers, said Mark Kantrowitz, an expert on financial aid and publisher of the websites FinAid.-org and Fastweb.com .
A recent report by the federal Consumer Financial Protection Bureau found that private loans make up $150 billion of the more than $1 trillion in outstanding student-loan debt. Student advocates often pooh-pooh private loans because they typically have uncapped, variable interest rates that hit those who can least afford them the hardest.
The good news is that the total amount of private loans taken out by OSU students dropped nearly 26 percent from 2006-07 to 2010-11 to $26.7 million, the data show. The subprime mortgage credit crisis, better counseling to warn students about the risks of private loans, and increased lending limits on federal Stafford loans probably all played a role in the decrease, experts say.
But the amount of federal PLUS loans to OSU students jumped nearly 28 percent in 2009-10 and almost 35 percent in 2010-11 for a total of $80 million.
Some student advocates worry that PLUS loans are more like private loans because they require parents to pay a high, fixed interest rate of 7.9 percent plus a 4 percent origination fee.
The loans let parents borrow money to pay for expenses not already covered by their child’s financial-aid package, up to the full cost of attendance.
Parents can qualify for PLUS loans by meeting minimal standards — more minimal than for some private loans. There also is no annual loan limit or lifetime cap, which has resulted in some parents borrowing more than they can afford.
- Ohio Board of Regents Chancellor Jim Petro said he thinks most students who graduate from a public university in Ohio are leaving with a manageable amount of debt. He said those who most often default on loans are among the growing number of students who leave high-cost, for-profit colleges — often before they earn a degree — or who have a diploma but owe much more money than they’re earning.
The number of delinquent student loans nationwide has grown substantially over the past few years, fueled by the poor economy, spiraling college costs and relaxed borrowing standards. OSU’s default rate remains relatively low — 3.5 percent. But even that is up from 3.1 percent a year earlier, and it means that students would default on about $7.6 million in loans.
In a perfect world, no students would default on their loans because there are so many options, including consolidation, deferment, forbearance, loan modification and repayment to at least find temporary relief, said Kate Trombitas, the vice president of financial education at Inceptia, a division of the National Student Loan Program. Unfortunately, it’s not even close to a perfect world.
- That’s why schools and the government should do a better job of teaching people about their options, and students and families should become more financially literate, said Trombitas, a former associate director of OSU’s Student Wellness Center.
Petro also is concerned that students are increasingly borrowing more money than they need to cover tuition and basic living expenses. “Somewhere along the way, more students started borrowing for their lifestyles, not just their educational needs,” he said.
Filling the gap
Sara Graf, 21, of the Fairfield County village of Bremen, knows how lucky she is.
THOMAS LEVINSON DISPATCH Sarah Graf, a senior psychology and strategic communication major, talks to students interested in leading campus tours at Ohio State.
Her dad works as a construction technician for University Hospital East, so she was able to get a 50 percent discount on her OSU tuition. But if Graf, who is majoring in psychology and strategic communication, hadn’t started planning for college while still in high school, she’d probably be saddled with a lot more debt.
“We’re expected to go to college and know how to pay for it, but if you don’t plan, it’s almost impossible not to fall back on loans and get into a vicious cycle of debt,” she said.
A standout student at Fairfield Union High School, Graf started taking college classes at the Ohio University Lancaster campus in her junior year, which cost her nothing. That allowed her to enter Ohio State as a sophomore. She thought about graduating in three years but decided to tack on a second major.
Worried that her parents didn’t have the resources to pay for the rest of her tuition and room and board, Graf sought out every scholarship she could find her senior year in high school. The awards helped fill the gap, but she still had to take out a federal loan.
During her sophomore year, Graf cut her costs further by taking a job as a resident adviser, giving her free housing. She did it again her junior year and now supervises the front-desk staff of a residence hall.
And because Ohio State increased its need-based “Scarlet and Gray” grants from $3,000 to $4,000 this year, Graf didn’t have to borrow any money for the first time this semester. She plans to enroll in a master’s program in higher education next year and hopes to save money by landing a stipend. Though she said it was hard work figuring out how to pay for school, her education has been worth every penny.
And despite alarming news stories about students graduating with excessively high loan debt, Kantrowitz said, only about 10 percent of college graduates have total debt that exceeds their annual income.
Graduate and professional students are more likely than undergrads to borrow more than $100,000, with more than a third of law-school students and almost half of medical-school students graduating with six-figure student loan debt, he said.
That troubles Adam VanLuit, a 21-year-old political science student from Avon Lake in Lorain County, so much that he plans to work for a year before he applies for law school after graduating from Ohio State in the spring.
His mother paid for most of his undergraduate education with money her late husband left the family. But VanLuit will be responsible for law school.
He knows he’ll likely end up at the school that gives him the best deal.
“The sad truth is there’s too much at risk to go to a school if it ends up costing more than the return on my investment,” he said.
Ohio State has tried to be mindful of the burden that increasing costs place on students and their families, said Dolan Evanovich, OSU’s chief admissions officer. It has frozen mandatory fees the past two years in addition to sticking to the state-mandated 3.5 percent tuition cap and two years of tuition freezes before that, he said.
It also has increased financial aid and is looking for unconventional sources of funding, such as the recent decision to lease the school’s parking operation to private investors for $483 million, Evanovich said.
Of that parking payout, Ohio State has set aside $58.1 million in an endowed fund for scholarships, he said. Nearly $2.5 million from that fund will be paid out annually in the form of full-ride scholarships that include a $3,000 stipend that non-freshmen students can use for such things as study abroad.
- Ohio State has increased the amount of grants and scholarships it awards to students by 33 percent over the past three years for a total of $128 million this school year, he said. That additional money has allowed the school to support more middle-class students with grant assistance.
Before, only students whose families had an adjusted gross income of around $45,000 a year or less were eligible for institutional grants, said Stemper, OSU’s financial-aid director. Now, Ohio State can help students with a family income of nearly $70,000 a year.
Ohio State also has been giving substantially more aid to students with family incomes of $100,000 and up. In 2010-11, students with family incomes of more than $300,000 received an average of $2,629 in institutional aid, which is on par with the average that students whose families made $50,000 to $74,999 received, according to the data.
“We want to attract and retain the best and brightest students to Ohio State, which we do by offering high-quality academic programs and merit scholarships,” Evanovich said. “We also provide need-based grants to support access and opportunity for low-income students and for students who are first in their family to attend college.”
The argument for merit aid is that it gets full-pay students to enroll, which can help colleges meet their financial or enrollment goals, said Kantrowitz, the financial-aid expert.
But advocates for low-income students have long criticized merit aid, saying that the money would be better spent on students who otherwise couldn’t afford to go to college.
- Nearly all federal, state and institutional efforts to expand participation in college have gone to students who were born into the top half of the family-income distribution: above $61,600, said Tom Mortenson, a senior scholar at the Pell Institute for the Study of Opportunity in Higher Education, in Washington, D.C. Almost none of the new efforts have been directed to those born into the bottom half of family income, because that doesn’t help boost their rankings or reputation.“Higher education has become an engine of enriching the rich and impoverishing the poor,” Mortenson said.
A greater burden
College still presents a greater burden to lower-income students than to middle-income students, and to middle-income students than to higher-income ones, Kantrowitz said. Calculating the ratio of net price to total income of students proves it, he said.
Even with aid, the median family that reported making less than $50,000 in 2010-11 paid more than half of its income to send a child to Ohio State, according to OSU’s data. That’s based on OSU’s estimated total cost of $25,854 that year for tuition and fees, room and board, books and incidental costs.
The median family making $50,000 to $149,999 paid a little more than a quarter of its income, and the median family earning at least $150,000 used about 14 percent of its income to send a child to Ohio State, the data show.
- To further drive down families’ costs, Ohio State will offer an additional $75 million in grants and scholarships, both need-and merit-based, over the next four years, said Evanovich, OSU’s chief admissions officer. The university also has embarked on a $2.5 billion fundraising campaign, $500 million of which has been earmarked for student financial aid.
But increases in financial aid at a school typically don’t make up for tuition hikes, Kantrowitz said: “Obviously, the dollar increase in the financial-aid budget is less than the dollar increase in tuition revenue. Otherwise, why increase tuition?”
He said the nation’s leaders need to see a college education as a benefit to society — not just to individual students. Continuing to cut college funding, he said, is short-sighted and will hurt the economy and America’s global competiveness.
He’d like to see federal Pell Grants, which help needy students, doubled or tripled in the coming years.
“We need to have a Sputnik moment where we realize that we need to invest more in higher education, and not just a little more, but much more,” Kantrowitz said. “We’re no longer in an arms race; we’re in a brain race. And we’re falling behind.” firstname.lastname@example.org
Here’s advice for those struggling with loans
The U.S. Department of Education says that if borrowers are struggling to pay their federal student loans, they should contact their loan servicer to discuss options for relief such as:
• Income-based repayment, which can tie payments to borrowers’ discretionary monthly income. It also can extend the life of the loan for up to 25 years.
• Consolidating federal loans into a single, monthly payment. The fixed-interest-rate loan can be repaid over 30 years.
• Forbearance. It’s temporary relief for those facing a short-term financial hardship. During forbearance, payments are suspended but interest continues to accrue.
Those who have defaulted — generally meaning they haven’t made a payment in nine consecutive months — also should contact the agency attempting to collect the debt. Options to clear the loan from default include:
• A repayment plan.
• A loan rehabilitation, in which the borrower and the Education Department agree to a monthly amount followed by a series of on-time payments. Online help Details about both federal and private loans can be found at the following websites:
• Consumer Financial Protection Bureau, http://www.consumerfinance. gov/students
• U.S. Department of Education, studentaid.ed.gov • Finaid!, a privately run website that provides comprehensive information on student financial aid, advice and interactive tools. http://www.finaid.org
• Project on Student Debt, by the Institute for College Access & Success, which works to increase public understanding of financing higher education and the implications of that for families, the economy and society. projectonstudentdebt.org .