The recent action by Congress and the White House to ease interest rates on federally subsidized student loans is good news for those heading to college and for a nation where only 2 in 5 adults have a bachelor's degree. We must do all we can to support college attainment, and when loan rates were allowed to double this summer, we were headed in the opposite direction.
For the near term, the new legislation that ties Stafford loans to financial markets will relieve some of the financial burden on students and their families, who increasingly rely on loans rather than income and savings to meet college costs. While anything that controls cost is good, this nation -- which must improve educational attainment to remain competitive -- needs a comprehensive approach to college affordability and access.
The discussion must be thoughtful and free of political posturing, and it must involve all major stakeholders. Amid legitimate concerns about cost and debt, we should be wary of alarmist rhetoric and headlines suggesting the average college graduate is jobless and staggering under massive loan obligations.
Here are a few facts from the U.S. Bureau of Labor Statistics:
- 40 percent of student loan borrowers owe less than $10,000, and 70 percent owe less than $25,000. (That's $5,000 less than the average price of a new car.) News stories about students with more than $100,000 in debt are zeroing in on just 3.7 percent of borrowers, and the coverage seldom fully examines how they got in so deep.
- College graduates earn 74 percent more over their lifetimes than high school graduates.
- Two-thirds of all new jobs now require a postsecondary degree.
- Employment for college graduates has increased by 9 percent since 2007 - the start of the recession - while employment has declined by 9 percent for high school graduates without a college degree, and by 14 percent for those without even a high school diploma.
Recognizing the national need for a more highly educated work force, Indiana's Lumina Foundation for Education has called for 60 percent attainment of higher education in the U.S. by 2025. A college degree has never been more important in the history of our nation, or more lucrative. If you aren't convinced by the numbers above, here's another statistic: A recent Brookings Institution study estimated the investment return on a four-year college degree at 15.2 percent a year. That, the New York Times noted, is more than double the average stock market return since 1950 and five times the returns on corporate bonds, gold, long-term government bonds or home ownership.
All of this said, investing in a college education requires wise counsel and caution when undertaking debt. At UIndy, as at many of our peer institutions, we consider each student's financial situation and the level of state and federal aid they will receive, and try to reduce remaining "unmet need" with institutional grants. This year we are directing $30 million in institutional aid to support our students.
A student's ability to remain in college is closely tied to personal finances. This nation frets over retention rates while cutting state support for public universities, forcing them to raise tuition. With family incomes stagnating, and savings depleted during the recession, students are borrowing more to pay for college. Keeping interest rates low on subsidized loans is helpful but does nothing to reduce the generally higher rates students pay on private loans.
Colleges, of course, have an obligation to operate more efficiently, find new sources of revenue to minimize price increases, and demonstrate the value of the educational experience. UIndy's new strategic plan is sharply focused on all three. Our new Professional Edge Center is one initiative that will add value by providing students with many opportunities for professional connections, experiences and mentoring. We are engaging extensively with alumni and other local business professionals, who also will provide essential feedback to ensure curriculum relevance.
College cost and financing are complex issues and call for a comprehensive approach to supporting students and families - if for no reason other than our national interest in remaining competitive. The recent congressional action addresses only one facet of the problem - interest rates on loans. It does not address other potential policy decisions that could move more students toward college attendance and completion, including refinancing of loans, forgiveness of loans during bankruptcy proceedings, or even tax breaks.
A broad package of support that will increase educational attainment requires federal and state officials and higher education leaders to work together. Let's roll up our sleeves and go to it.