Study: Not all students are deep in debt

A graduation cap with money symbolizes student loans

TEXT OF INTERVIEW

TESS VIGELAND: We've been hearing for the last couple of years that along with all their other things, students are also packing a ginormous debt burden as they head off to school. Tens of thousands of dollars in loans that will haunt them for decades after they graduate.

It's true -- but only for a small minority of the student population. So says a study out this week, co-authored by Patricia Steele, a policy analyst at the College Board. I told her the findings seemed counterintuitive.

Patricia Steele: That's a perfect word. It's true, everyone is worried about the rising price of college and everyone is worried about college debt. You can hardly say that all students are buried in debt. 34 percent of those who finished a bachelor's degree, in our study in '07-'08, had no debt at all. The two-thirds that did borrow, about half of them borrowed less than $20,000.

Vigeland:Are there instances where there is outrageous borrowing going on?

Steele: Absolutely, there are these students who are borrowing excessively. They're borrowing in the private market, loans that don't have interest rates legislated by Congress, they don't have economic hardship provisions and they don't qualify for federal income-based repayment loan plans.

Vigeland: You also broke this out based upon what type of school -- two-year versus four-year, public versus private versus for profit. Can you give us a bit of a breakdown of depending what kind of school these students are going to, how much they're having to borrow?

Steele: On average among those students that borrow, the median debt level for an associate's degree recipient is $7,000.

Vigeland: So this would be for example, a community college.

Steele: That's right. And for a bachelor's degree in the four-year public sector, it's a little lower than the median, $17,700. Where we're seeing really high, excessive borrowing is in the for-profit sector and this is also the sector where we've seen a big increase in borrowing in the last four years, since the data was released.

Vigeland: Now this would be the so-called "career colleges," like DeVry, Kaplan, places where you go to get a specific kind of training?

Steele: Right. Those institutions, as well as smaller for-profit institutions.

Vigeland: And what are those students graduating with?

Steele: It looks like for a bachelor's degree, $32,650. And in associate's degree in the for-profit, $18,800.

Vigeland: Can you give me some sort of sense of why the conventional wisdom seems to be that college graduates are entering the work force with tens of thousands of dollars to pay off?

Steele: Well, there certainly are students who fit that description. Among all students, 12 percent are borrowing over $30,000 and this is just for their first degree. I think that the discussion focuses on those students a lot and it makes it seems as though that's all students.

Vigeland: Do you worry at all that potential students will hear that college is too expensive, that they're going to graduate with unmanageable debt loads to the point where they don't apply?

Steele: Yes, I think it is. And I think it's very unpopular to point out this reality that not all students are buried in debt. And I feel as though this is an important message to bring forth, because otherwise, low-income students hear this message over and over again about excessive borrowing and they fear that college is beyond them, that they cannot afford the price.

And there still are institutional options that are reasonable. You can both save for it, you can work throughout it and borrowing a small reasonable amount of debt that comes from federal sources, with good interest rates is still a wise investment when you're talking about your future human capital.

Vigeland: Patricia Steele is a policy analyst with the College Board and co-author of the policy brief "How Much Are College Students Borrowing?" We'll have a link to that on our Web site. Patricia, thanks so much.

Steele: Thank you so much.

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