Materiales de máximo interés para el debate chileno sobre la deuda estudiantil, referidos a los EEUU, a las medidas adoptadas allá para alivianar la situación y a datos sobre el alza de aranceles en universidades de distinto tipo. Todo material Copyright © 2011.
How Much Student-Loan Debt Is Too Much?
By Jeff Selingo, The Chronicle of Higher Education, October 26, 2011, 8:50 pm
It used to be that Americans had too much debt. Now they don’t have enough. The Wall Street Journal reported over the weekend that “household thrift” is a key reason the economic recovery has been so weak.
But student-loan debt seems to be immune from this newfound penny-pinching. Students and their families are still taking on record amounts of debt to pay for a college education. Despite some debate over the exact amount of outstanding student-loan debt right now, the number has already surpassed credit-card debt and is expected to cross the $1-trillion mark for the first time this year, says Mark Kantrowitz, publisher of FinAid, a Web site offering student-aid advice and tools.
The growing burden of those payments in a tough economy is becoming a hot political issue, especially in recent weeks with the Occupy Wall Street movement. That’s one reason President Obama announced new measures on Wednesday to expand loan consolidation and income-based repayment programs a bit.
Far more radical or broad-based ideas have been proposed recently, including forgiving all student debt to stimulate the economy or expanding income-based repayment to everyone.
Most Students Need a Stake in Paying for College
What worries me in some of these debates is that student-loan debt of any amount is portrayed as the villain. Students or their parents at most income levels should have a stake in paying for college. They are, after all, getting something in return. Taking on a student loan seems like a good investment, when placed next to the lower unemployment rate for college grads and the lifetime payoff of a bachelor’s degree.
“The asset you are borrowing against is human capital,” explains Justin Wolfers, an associate professor of business and public policy at the University of Pennsylvania. Unlike home values, the value of human capital isn’t likely to drop sharply in a year, he says.
More than half of the students at public and private four-year colleges are now graduating with debt, according to the College Board. The average per borrower at public colleges is $22,000; at private colleges it’s $28,100. It has been reported that the financial payoff of a bachelor’s degree is $550,000 over a person’s lifetime, so the average level of debt still seems like a good investment.
Of course, don’t tell that to recent college grads who are unemployed or working in jobs that don’t require a bachelor’s degree. In a global economy, there could be a limit to the human capital of many college grads in the United States (read: lifetime income), so while a college degree might make good economic sense, one at any cost probably doesn’t.
And that’s where the debate on student debt should be focused: How much is too much? While economists are confident that a college degree is worth more than just a high-school diploma, “there is less evidence that an expensive college degree is worth it compared to a cheap one,” says Wolfers, the Penn economist. “Going to college is worth it, [but] doing so expensively might not make a lot of sense.”
That means big trouble for expensive colleges where students graduate with higher-than-average amounts of debt. Those institutions have been helped by the association of price with quality in many people’s minds, the wide availability of loans, and a willingness of students and families to take on a lot of debt.
End of an Era of Easy Money for Student Loans
Those days are probably coming to an end. If we’re indeed entering an age of austerity in Washington (a big if), the availability of student loans will probably tighten. The federal government makes 90 percent of new student loans, and as Mark Zandi, chief economist at Moody’s Analytics points out, it doesn’t do so based on the creditworthiness of borrowers. “The federal government will have to do some form of better underwriting, or otherwise they will get swamped with losses,” Zandi says.
Students and their families will also probably get clearer financial-aid offers from colleges, if a push by the federal government for better disclosure succeeds. One hope is that clearer aid-offer forms will help students better understand the type (especially loans vs. grants) and amount of aid they qualify for, and will make it easier for them to compare aid offers from different institutions.
With potentially less federal loan money available and more information, perhaps students and their families will begin answering the question: How much is too much?
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Rise in Sticker Price at Public Colleges Outpaces That at Private Colleges for 5th Year in a Row
By Beckie Supiano, The Chronicle of Higher Education, October 26, 2011
The State of California enrolls about 10 percent of the country’s full-time students attending public four-year colleges, and about 15 percent of those at public two-year colleges. So when the state’s public colleges have a big tuition hike—as they did this year—it has a big impact on the average tuition increase at public colleges across the country, says a new report from the College Board.
For the fifth year in a row, the percentage increase in average published tuition and fees at public four-year colleges was higher than it was at private ones, according to the report, “Trends in College Pricing 2011.” The report, released on Wednesday, examines annual changes in colleges’ sticker prices, as well as the net prices students pay after grant aid and tax benefits are considered. A companion report, “Trends in Student Aid 2011,” looks at the money that helps students meet those growing prices. (The pricing report looks at data through this academic year, while the student-aid report has information through 2010-11.)
The average price for tuition and fees at public four-year colleges was $8,244 for in-state students in 2011-12, up from $7,613 in 2010-11, an 8.3-percent increase. That percentage change drops to 7.0 percent if California—which had a 21-percent increase in tuition in that one-year period—is excluded.
The price increase for public two-year colleges was also heavily affected by California. Average tuition and fees at public two-year colleges was $2,963 for in-state students in 2011-12, up from $2,727 the year before, an 8.7-percent increase. That increase drops to 7.4 percent when California’s 37-percent increase is excluded.
At private four-year colleges, published tuition and fees rose from $27,265 in 2010-11 to $28,500 in 2011-12, a 4.5-percent increase, the report found.
Tuition increases at public colleges have been a source of concern across the country as states grapple with budget cuts, and “there’s a tendency to look at national numbers,” said Sandy Baum, an independent policy analyst for the College Board and an author of the reports, who also contributes to a Chronicle blog. Yet, she said, the price increases facing students vary significantly from state to state. In Connecticut and South Carolina, for example, tuition at public four-year colleges grew by only about 2.5 percent; and in Montana and North Dakota, tuition and fees at public two-year colleges grew by less than 2 percent.
Factoring in Grants
Of course, most college students don’t actually pay those sticker prices: About two-thirds of full-time undergraduates receive grant aid. The College Board also looks at net price, which it defines as the average price paid by all full-time students, whether they receive student aid or not, after grants and tax benefits are subtracted from sticker price.
The average net tuition and fees at public four-year colleges came to $2,490 in 2011-12; at private four-year colleges, it was $12,970. The report also examines net price once room and board costs are considered. People need to live and eat whether they are students or not, Ms. Baum says, but she uses these costs as a stand-in for students’ foregone earnings during college.
The pricing report also takes a look at some of the major revenue sources and cost pressures influencing college prices, and the picture is hardly rosy. State appropriations per full-time-equivalent student dropped by 4 percent in constant dollars in 2010-11, after dropping 6 percent in 2009-10 and 9 percent in 2008-9.
And in 2010, average American income in every quintile of the income distribution was lower in inflation-adjusted dollars than it had been a decade before.
The report does point out that endowments at private nonprofit colleges grew in value by about 9 percent, after adjusting for inflation, in 2009-10, after two years of declines.
Change in Tax Credits
The biggest change in student aid for the 2010-11 year was the American Opportunity Tax Credit, introduced in 2009, says the student-aid report.
Sometimes, people argue that tax credits should not be considered financial aid, Ms. Baum said, but the College Board counts them because they are a government subsidy just as federal grants are. And tax benefits reach a larger number of people than the Pell Grant does: about 12 million tax filers received education tax credits or deductions in 2009-10 (the most recent year for which IRS data is available), while about 9.1-million students received Pell Grants in 2010-11.
Historically, tax credits have been seen as a benefit for the middle class, Ms. Baum said, but that is not the case with this new credit, which reaches a much broader swath of the college-going population. Because the American Opportunity Tax Credit is partially refundable for families who do not owe taxes, it can reach lower-income families, and the income limit, $180,000 for joint filers, is higher than it has been for other education tax benefits. As a result, the percentage of tax savings from all higher-education tax credits and deductions that goes to families with incomes above $100,000 grew from 18 percent to 26 percent in one year.
The share of student aid provided by the federal government has grown in recent years, from 68 percent in 2005-6 to 74 percent in 2010-11. The federal programs that have grown the most quickly are the Pell Grant program, grants for military veterans, and tax benefits, the report says.
About 56 percent of students who graduated in 2009-10 from the public four-year colleges where they began their studies had borrowed student loans, with an average debt of $22,000. Sixty-five percent of that year’s graduates who finished at the private four-year colleges where they began their studies borrowed, and their average debt was $28,100.
The College Board also included information on students who borrow but do not complete their degrees. About 10 percent of dependent students who last attended a public four-year college, but did not graduate, had borrowed more than $28,000. About 17 percent of students who were last enrolled at a private college and did not graduate had borrowed at least that amount, as had 15 percent of students who last attended a for-profit college and did not graduate.
Rising Prices at Public and Private Four-Year Colleges, 2000-1 Through 2010-11
Private four-year colleges have higher sticker prices, and higher net prices (what students pay after grant aid and tax benefits), than do public four-year colleges. But in recent years, the percentage increase in average published tuition and fees has been higher at public colleges than at private ones.

Obama’s Student-Loan Plan Scores Political Points but Offers Limited Relief
Jewel Samad, AFP, The Chronicle of Higher Education, 27 october 2011
Speaking at the U. of Colorado at Denver on Wednesday, President Obama outlined the steps his administration is taking to help make student debt burdens more manageable.
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By Kelly Field
With the nation’s student-loan debt approaching $1-trillion, and default rates at their highest level in a decade, President Obama is taking modest steps to ease students’ debt burdens.
Mr. Obama and administration officials announced changes this week that will reduce monthly payments for low-income borrowers and drop interest rates for students who consolidate into the government’s direct-loan program.
The announcements—which came as the Occupy Wall Street protest stretched into its fifth week, fueled in part by borrowers with large educational debts and slim job prospects—were billed as a response to petitions urging the president to forgive student loans to stimulate the economy.
But the president’s plan is a far cry from the kind of relief that the Wall Street protesters and other debtors are demanding, and it won’t do a thing to address the roots of their repayment struggles: rising tuition and high unemployment.
Last year, the unemployment rate for college graduates under the age of 24 rose to 9.4 percent, the highest level in at least 15 years. Meanwhile, college tuition has continued its inexorable climb, reaching an average of $8,244 for in-state students at public colleges in 2011-12, and $28,500 at private four-year colleges, according to College Board figures released this week.
Another challenge: Next July, the interest rate on student loans will double, to 6.8 percent, costing the average borrower thousands of dollars over the life of his or her loan.
To be fair, there isn’t much Mr. Obama can do about the rising cost of college, which is driven largely by cuts in state appropriations and other factors outside his control. And student-loan interest rates are set by Congress. Mr. Obama has certainly tried to tackle unemployment, offering a sweeping jobs bill that could have put some borrowers to work. He just hasn’t been able to persuade Congressional Republicans to accept the bill’s proposed tax increases for wealthy Americans.
Given these constraints, student-advocacy groups say they’re grateful to the president for using his executive authority to offer borrowers some relief, however limited.
“The president is doing what he can with a paralyzed Congress,” said Richard T. Williams, a lobbyist with the U.S. Public Interest Research Group. “It might be a limp when we need a leap, but we need Congress to provide that leap.”
Under Mr. Obama’s plan, current students who have both direct loans and bank-based guaranteed loans will get an interest-rate reduction if they consolidate into the government’s direct-loan program. Roughly 5.8 million students could qualify for the benefit, the White House estimates.
The president is also accelerating a reduction in the maximum percentage of discretionary income that borrowers in income-based loan-repayment plans pay, from 15 percent to 10 percent. That cut was scheduled to take effect in 2014, but Mr. Obama’s plan moves it up two years.
The combined changes will save some borrowers hundreds, if not thousands, of dollars over the life of their loans, but both come with caveats.
On the consolidation program, only borrowers with both direct and guaranteed loans would be eligible for the interest-rate reduction, and only guaranteed loans would receive the maximum interest-rate reduction of half a percentage point; direct loans would get only a quarter of a percentage point. The program will be in effect for only six months, from January until the end of June. Most significantly, the benefit is only available to current students. Those jobless college grads who are protesting on Wall Street and at similar events elsewhere won’t qualify.
As for income-based repayment, the White House estimates that 1.6 million low-income borrowers will see lower monthly payments under a 10-percent cap; but only 450,000 borrowers have signed up for income-based repayment since it took effect two years ago, in part because the program has not been well publicized.
Mr. Obama, who won the 2008 election with the support of young people, has been under pressure from students and graduates to help borrowers saddled with unmanageable debt. More than 32,000 people have signed on to a “We the People” petition on the White House’s Web site calling for loan forgiveness. A similar petition on SignOn.org has attracted more than 640,000 signatures.
Though the White House plan is much more modest than the relief the petitions propose, it could help Mr. Obama win back some young voters who have become disenchanted with the president for failing to accomplish more on the environment and other progressive causes.
In a speech on Wednesday at the University of Colorado’s Denver campus, Mr. Obama empathized with college students carrying heavy debt, noting that he and his wife graduated from law school with a combined $120,000 in debt.
“We were paying more for our student loans than we paid on our mortgage each month,” he said.
The changes, he said, would “give the economy a boost” by freeing up money that borrowers could use to buy a house, start a business, or save for retirement.
But the good will that Mr. Obama earned with his announcement could be relatively short-lived. Next July, just three months before the presidential election, interest rates on student loans are scheduled to double. For the average borrower with $24,000 in debt, that would mean nearly $5,000 more in interest over a 10-year loan repayment term, according to the American Council on Education.
“While the administration should get credit for what they’ve done, the big issue for students will be the doubling of interest rates,” said Terry W. Hartle, senior vice president for government relations at the council.
It’s up to Congress to set interest rates, but don’t count on voters to make the distinction. If they blame Mr. Obama for their rising debt, it could hurt his chances of re-election in 2012.
Asked if the president was concerned that the doubling could negate his efforts to make student loans more affordable, Melody Barnes, director of the White House Domestic Policy Council, said the administration was “trying to exercise the authority we have,” but that interest rate-setting was “Congress’ bailiwick.”
“We’re doing all we can to encourage Congress to move forward and address these needs,” she said.