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STEVE Chiotakis: Whether you’re a student heading off to college in the fall, or the parent who very well may foot the bill, the privilege of higher education comes with a hefty price tag. This week the College Board said graduates can carry an enormous amount of debt. A quarter of graduates from private colleges leave with more than $30,000 in debt. And more than half of those going to for-profit schools borrow even more. Patricia Steele is with the College Board. Patricia how did you come to your findings?
PATRICIA STEELE: Well we decided to look at, you know, the problems of high debt across these various groups. So what we found is independent students, your nontraditional older students are much more likely to have high debt situations when they graduate. We also looked at race. The sample sizes were quite small when you’re looking at race, but we did see generally that African Americans students tended to be in that high debt category more often than other race groups. The interesting finding, though, was by income. There was not as much variation as we expected. Students at all levels of income had equal likelihood of being in that high debt category, and some of that is attributable to the type of choice of institutions that students make, but we didn’t see a significant difference on that end.
Chiotakis: You’re one of the authors of this analysis, and the conclusion here is too many students are borrowing more than they’re likely to be able to manage down the road. I mean that’s a pretty startling conclusion.
STEELE: Yeah, that’s right. We looked at this data once before, and we noticed that there’s this growing minority of students who are just borrowing astronomical amounts of money, you know higher than $145,000. So we decided to take that top quartile of borrowers. What stands out is that these students are much more likely to take out non-federal loans, which often are the loans with far less favorable terms on them, and these students are borrowing in very high amounts.
Chiotakis: It looks as if there’s a really big difference in the debt students carry between for-profit and not-for-profit schools.
STEELE: Right, that’s one of the interesting findings, you can see that the prevalence of high-debt borrowing is much more significant in the for-profit sector — 53 percent compared to 24 percent in the private four-year sector, and 12 percent in the public four-year sector, so a very big difference.
Chiotakis: And why is that?
STEELE: Well, the for-profit sector, you know, similar to the private four-year sector, of course, has higher prices, but the difference is that for-profit institutions generally don’t have the generous institutional grants and scholarship programs that you see in the non-profit sectors.
Chiotakis: So they’re borrowing more money.
STEELE: That’s right. They have to borrow to meet the cost.
Chiotakis: We heard from a caller earlier who was thinking about paying for part of her grad school by taking money from her Roth IRA. Our money analyst Liz Pulliam Weston cautioned her about taking on too much debt, even federally subsidized debt at reasonable rates. Because even if you have a good education starting out with a lot of debt is not a good idea. So what do you do?
STEELE: This is an important point. I obviously would never recommend to someone to not take on any debt. I think taking on some debt is OK. Taking it on carefully, understanding the terms of the loans that you’re about to enter into is very important. And honestly, without students loans there’s many students for whom college would not even be an option. But you’re right, in this economy students are facing a difficult job market and tremendous debt load. And to me, personally, I’m often very concerned for students who can no longer make the choice to work in public service, you know, to work in schools, to work as a social worker, because they have a huge loan debt. But I will point out that many students do graduate without debt. So it’s not that the problem is for all students, it’s that there’s this minority of students for whom debt loads are getting increasingly high, and it’s important for the policy conversations to focus on that.
Chiotakis: Patricia Steele, research consultant to the college board, thank you for being with us.
STEELE: Thank you.
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