STUDENT DEBT MYTHS AND FACTS Second Edition

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1 STUDENT DEBT MYTHS AND FACTS Second Edition April 2014 The Issue Student loan debt is now approximately $1 trillion, and the delinquency rate for student loans has increased to 10 percent. Critics are concerned that student loans may be the next financial bubble to burst and that borrowing for higher education is not worth the financial risks, especially for students who attend private institutions. What is the truth? This presentation examines a number of myths about higher education student finance and sets the facts straight.

2 MYTH Many students owe more than $100,000 when they graduate. FACT In 2012, only 4% of all borrowers owed $100,000 or more in student debt. The average debt level of bachelor s degree recipients at independent colleges and universities is $19,500 less than the price of a modest automobile. Average Total Student Loan Debt per Bachelor's Degree Recipient $25,000 $20,000 $19,000 $18,200 $18,000 $19,200 $20,000 $19,500 $15,000 $11,900 $11,900 $11,700 $13,000 $13,900 $14,300 $10,000 $5,000 $ Public 4 Year Independent 4 Year Source: The College Board, Trends in Student Aid 2013.Note: All totals are expressed in 2012 dollars.

3 MYTH High levels of student debt make independent colleges unaffordable. FACT One quarter of students who graduated with a bachelor s degree from a four year independent college or university did not have any educational debt. For those who borrowed, the difference between the median debt levels for graduates of public versus independent institutions is only $4,375. Distribution of Total Undergraduate Debt No Debt 26% 37% Less than $10,000 6% 9% 13% $10,000 to $19,999 11% 13% Median Debt of BA Recipients Who Borrowed: $20,000 to $29,999 16% 19% Public 4 Year: $22,625 Independent 4 Year: $27,000 For Profit 4 Year: $33,900 $30,000 to $39,999 9% 13% 16% $40,000 or more 35% 0% 5% 15% 25% 30% 35% 40% Public 4 Year Independent 4 Year For Profit 4 Year Source: U.S. Department of Education, National Center for Education Statistics. National Postsecondary Student Aid Study, (NPSAS:12). Analysis by the Council of Independent Colleges.

4 MYTH Only wealthy families can afford to send their children to independent colleges. FACT Independent colleges enroll students of all financial backgrounds, and at about the same percentages as public institutions for lowand middle income students. Student Enrollment by Family Income Less than $25,000 15% 16% 22% $25,000 $44,999 $45,000 64,999 $65,000 84,999 $85, ,999 17% 15% 11% 11% 13% 13% 13% Public Nondoctoral Public Doctoral Private Nondoctoral Private Doctoral $105,000 or more 23% 32% 32% 35% 0% 30% 40% Source: U.S. Department of Education, National Center for Education Statistics. National Postsecondary Student Aid Study, (NPSAS:12). Analysis by the Council of Independent Colleges.

5 MYTH It is very difficult to receive financial aid at independent colleges. FACT A larger proportion of students at independent colleges receive financial aid than do students at public institutions. Students enrolled at independent colleges are twice as likely to receive grants from their institutions as students enrolled at public institutions, and more than three times as likely as students at for profit institutions. Percent of Undergraduates Receiving Financial Aid 100% 90% 80% 83% 89% 90% 80% 73% 83% 70% 64% 60% 50% 51% 40% 40% 39% 35% 30% 24% 0% Any Financial Aid Institutional Grants Federal Grants Student Loans Public 4 Year Independent 4 Year For Profit 4 Year Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics Note: Percentages for first time, full time undergraduates during academic year Any Financial Aid category includes state and local grants.

6 MYTH Students at public institutions get more financial aid than students at independent colleges and universities. FACT Students at independent colleges receive three times the amount of institutional aid as do students at public institutions, and five times as much as students at for profit institutions. Independent colleges give students nearly six times as much institutional grant aid as does the federal government. $35,000 Average Amount of Financial Aid $31,273 $30,000 $25,000 $20,000 $19,785 $19,515 $15,000 $14,826 $10,000 $5,000 $4,765 $5,134 $2,872 $5,248 $4,875 $8,733 $7,529 $6,310 $0 Total Financial Aid Institutional Grants Federal Grants Student Loans Public 4 Year Independent 4 Year For Profit 4 Year Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics Note: Percentages for first time, full time undergraduates in aid programs during academic year Total Financial Aid category includes state and local grants. Analysis by the Council of Independent Colleges.

7 In fact, $30.0 Independent Colleges Give Students Nearly Six Times as Much Institutional Grant Aid as Does the Federal Government $27.9 $25.0 Grant Aid in Billions $20.0 $15.0 $10.0 $10.1 $16.2 $5.0 $0.0 $4.7 $1.9 $2.6 $1.3 $1.4 $ Academic Year State Federal Institutional Source: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System, finance component, various years. Note: Data represents grant aid awarded to students at Title IV, degree granting, U.S. private nonprofit, fouryear institutions. Analysis by the National Association of Independent Colleges and Universities, Private Colleges: FactFile.

8 MYTH All students enrolled at independent colleges pay the same high tuition (irrespective of family income). FACT On average, the actual amount students pay at private colleges is less than 60 percent of the total cost of tuition, fees, room and board. Students with lower family incomes pay a much lower percentage of the total costs. Average Net Price as a Percentage of Total Costs by Family Income 100% 96% 95% 90% 80% 83% 80% 83% 75% 90% 88% 91% 70% 68% 68% 60% 50% 58% 51% 58% 47% 48% 55% 61% 40% 30% 0% All income levels $0 30,000 $30,001 48,000 $48,001 75,000 $75, ,000 $110,001 or more Public 4 Year Independent 4 Year For Profit 4 Year Source: U.S. Department of Education, National Center for Education Statistics, Student Financial Aid, Academic Year : First Look (Provisional Data). Analysis by the Council of Independent Colleges. Note: Total costs include tuition, fees, and room and board on campus for first time, full time undergraduates.

9 Other factors to consider: Over the past decade, tuition and fees at public institutions have increased twice as fast as at independent institutions; The graduation rates at independent colleges are much higher than those at public and for profit institutions, even for lowincome students; Students at independent colleges graduate much sooner (about ten months earlier) than do their peers at public institutions and 48 months earlier than students at for profit institutions which means fewer years of paying tuition and a quicker start at earning a salary; and Graduates of independent colleges are far less likely to default on their student loans. Inflation Adjusted Published Tuition and Fees from to Inflation Adjusted Published Tuition and Fees Relative to Public 4 Year Public 2 Year Independent 4 Year 0 Source: The College Board, Trends in College Pricing 2013, Figure 5, page 14. Note: Values for published tuition and fees by sector, adjusted for inflation, as a percentage of published prices.

10 Four Year, Five Year, and Six Year Graduation Rates by Institutional Type 70% 62% 65% 60% 57% 50% 52% 51% 40% 32% 36% 40% 42% 30% 0% Four year Five year Six year Public 4 Year Independent 4 Year For Profit 4 Year Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics Note: Percentages are for entering cohort of % Four Year, Five Year, and Six Year Graduation Rates of Pell Eligible Students by Institutional Type 70% 68% 60% 59% 61% 50% 40% 44% 47% 30% 24% 18% 0% Four year Five year Six year Public 4 Year Independent 4 Year For Profit 4 Year* * Four year and five year graduation rates for for profit 4 year institutions are not available. Source: U.S. Department of Education, National Center for Education Statistics, Beginning Postsecondary Students (BPS 04/09). Analysis by the Council of Independent Colleges. Note: A "Pell eligible student" is defined as any student who had accumulated Pell grants greater than zero by Graduation rates are calculated based on students who stayed at their first institutions from 2004 through 2009.

11 Time to Degree by Institutional Type 70% 65% 60% 50% 59% Median Time to Degree Public 4 year: 55 months Independent 4 year: 45 months For Profit 4 year: 103 months 40% 38% 30% 28% 18% 15% 9% 8% 5% 22% 21% 0% 48 months or less months months 73 months or more Public 4 Year Independent 4 Year For Profit 4 Year Source: U.S. Department of Education, National Center for Education Statistics, Baccalaureate and Beyond Longitudinal Study (B&B:08/09): First Look. Note: Percentages are for first time bachelor s degree recipients; time to degree is calculated by number of months from enrollment in postsecondary education to degree attainment for first time bachelor's degree recipients. Federal Student Loan Default Rates by Sector 16% 12.9% 13.6% 9.6% 8% 6% 8.3% 5.2% 5.2% Independent Public For Profit 4% 2% 0% FY2010 FY2011 Source: U.S. Department of Education, Default Rates Continue to Rise for Federal Student Loans, September 30, Note: Percentages represent two year cohort default rates (CDR).

12 For additional information about these facts and others that describe the quality and affordability of independent colleges, please see: For questions, please contact: Laura Wilcox, Vice President for Communications (202)

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