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91探花Cohort Default Rate Remains Very Low Relative to National Average

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The U.S. Department of Education (ED) recently released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although the UW鈥檚 CDR rose while the national CDR declined, the UW鈥檚 rate still remains well below that of the nation.

ED is in its first year of using only the听more accurate three-year CDR measure 鈥� as opposed to the two-year CDR. Thus, this year鈥檚 report only includes the FY2011 three-year CDR, which represent the percentage of student borrowers who entered into repayment in FY2011, but failed to make loan payments for a 270-day period within three years of leaving school.

The Department provides breakdowns of its data by , and . Here are some key findings:

  • The national three-year CDR declined from 14.7 to 13.7 percent overall.
  • The three-year rate decreased over last year鈥檚 rates for all sectors:
    • Public institutions decreased very slightly from 13.0 to 12.9 percent,
    • Private nonprofits decreased from 8.2 to 7.2 percent, and
    • For-profits鈥� whopping 21.8 percent rate decreased to 19.1 percent.
  • The UW鈥檚 three-year CDR increased slightly from 3.9 to 4.3 percent, but this is still nearly 10 percentage points below the national average.听

While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The 91探花reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them.听Former 91探花students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (osfa@uw.edu, 206-543-6101). Students can also visit to explore their repayment options.

Kaplan鈥檚 New 鈥淥pen College鈥� May Not Be a Bargain for All Students

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On Monday, launched “” which is intended to help adult students earn a Bachelor of Science degree in Professional Studies by offering credit for a combination of competency-based course assessments, experiential learning, and external exams (AP, IB, CLEP, DSSTs, etc.). Open College will include free online courses and mentoring to help prospective students identify and organize prior experience that could qualify for college credit. Once students enroll and have their prior skills assessed for credit, they will pay a subscription fee of $195 per month, an assessment fee of $100 per each of the remaining 35 鈥渃ourse equivalents鈥� needed to earn a degree, and a $371-per-credit fee for a final six-credit capstone course.

According to :

鈥淎 student entering with no credits who pursued the program for 48 straight months could earn a bachelor鈥檚 degree for about $15,000. Students who earned credits based on their prior experience would end up paying less than that. Officials expect that such students would typically enroll with about 60 credits, take 24 to 30 months to complete a degree, and pay about $9,500.鈥�

Kaplan鈥檚 administration sees Open College as the newest candidate in the hunt to create a $10,000 bachelor’s degree and as a new, flexible way for adults to advance their career.听 While Open College鈥檚 structure and pricing may work well for some students, a few things should be considered before rushing to enroll in Open College.

First, students at Open College will receive little, if any, financial aid.听 Open College鈥檚 website says it will not participate in federal student aid programs; it also gives no indication that students will be eligible for state financial aid or that it will offer any form of institutional aid. Therefore, although comparisons are difficult and potentially problematic, it鈥檚 worth noting that in 2013-14, resident students at public four-year institutions paid an average of $3,120 in annual net tuition and fees (published tuition and fees less grant and aid scholarship from federal, state or institutional sources).[1] If we assume, as Kaplan did, that a student entering with no credits would take 48 months to earn a degree and that tuition and fees would not increase during those four years, then a resident student who enters a public four-year with no previous credits would pay roughly $12,480 in tuition and fees to earn a four-year degree, compared to a similar student at Open College who would pay $15,000. Of course, this total does not consider the cost of rent or room and board, which can be very expensive; but neither does Open College鈥檚 estimate, even though a student earning a degree through their program would presumably still be spending money to eat and live while earning a degree.

Second, employer doubts about the quality of an online degree may impact graduates鈥� employability. According to the released last fall, only 41 percent of hiring managers believe that online programs are of the same quality as traditional, in-person programs.

[1]

AASCU States 鈥淧ay It Forward Is Not the Solution to Addressing College Affordability鈥�

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On Thursday, the American Association of State Colleges and Universities (AASCU) released examining the potential consequences of Pay It Forward (PIF) (please see our for background information). 听The AASCU brief summarizes other, similar approaches to paying for college and analyses PIF as a potential state approach to financing public higher education. 听

The report describes the following 鈥�13 Realities of PIF College Financing Proposals鈥�:

  1. Most students could pay more, not less, for college.
  2. Considerable uncertainty would be introduced into campus budgeting and planning efforts.
  3. The majority of college costs are not covered.
  4. Students from sectors with the heaviest student debt burdens would be ineligible to participate.
  5. The class divides in public higher education, and more broadly, in American society, could intensify.
  6. Costs borne by students pursuing privately financed degrees and higher-paying careers would increase dramatically.
  7. PIF is duplicative鈥攖here are existing public and private programs that calibrate student debt to earnings.
  8. PIF鈥檚 start-up costs would be enormous.
  9. Payment collection would be costly and challenging.
  10. Campus and state leaders would have strong incentives to promote programs leading to high-paying occupations, to the possible detriment of the liberal and applied arts, humanities, and public service careers.
  11. Underlying college cost drivers would not be addressed.
  12. Support for state and institutional student financial aid could dissipate.
  13. Support for maintaining existing state investment in public higher education would erode, creating a pathway to privatization.

In addition, the authors discuss 鈥淭he Unknowns of 鈥楶ay It Forward鈥欌��:

  1. How will institutional financing gaps be addressed?
  2. How would payments be collected?
  3. Who would control PIF funds?
  4. How would PIF鈥檚 structure and revenue generation differ from campus to campus?
  5. How would PIF complement or conflict with federal higher education programs?
  6. How would transfer students be integrated into PIF?
  7. What would be the consequences for noncompleters?
  8. How would college savings change under PIF?
  9. How would PIF affect campus philanthropic campaigns?

The report鈥檚 conclusion reads, 鈥淐reating a lifelong tax and privatizing public higher education through pay it forward is not the solution to addressing college affordability.鈥� 听

I recommend that readers review .

AASCU Releases Latest State Outlook

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On Thursday, the American Association of State Colleges and Universities (AASCU) released its most .听 According to the report, state operating support for public 听four-year colleges and universities is 3.6 percent higher for FY 2015 than it was for FY 2014. Of the 49 states that have passed a budget thus far, support for higher education increased in 43 states and decreased in only 6 states. Of those 6 states that reduced funding, all were under 3 percent: Alaska, Delaware, Kentucky, Missouri, Washington (0.8 percent decrease) and West Virginia.

There was a relatively small amount of variation between states in terms of their year-to-year funding changes. For FY 2015, the spread between the state with the largest gain and that with the largest cut was only a 24 percent鈥攖his is compared to 57 percent, 25 percent and 46 percent, respectively, in FYs 2012, 2013 and 2014. The report notes that this decreased volatility likely indicates 鈥渁 continued post-recession stabilization of states鈥� budgets.鈥�

Charitable contributions to U.S. colleges and universities increased 9 percent in 2013, to $33.8 billion鈥攖he highest recorded in the history of the Council for Aid to Education (CAE) Voluntary Support of Education (VSE) survey. In addition, college and university endowments grew by an average of 11.7 percent in FY 2013, according to a January 2014 study released by the National Association of College and University Business Officers and the Commonfund Institute.听 This represents a significant improvement over the -0.3 percent return in FY 2012.

The report also describes ten highlights/trends from states鈥� 2014 legislative sessions, those being:

  1. State initiatives linking student access to economic and workforce development goals.
  2. Tuition freezes or increase caps in exchange for state reinvestment鈥攖his occurred in Washington and another example is discussed in .
  3. Performance-based funding systems that attempt to align institutional outcomes with state needs and priorities.
  4. Governor emphasis on efforts to advance state educational attainment goals.
  5. Interest in policies related to vocational and technical education, including allowing community colleges to grant certain four-year degrees (as described in ).
  6. Efforts to develop a common set of expectations for what K-12 students should know in mathematics and language arts.
  7. STEM-related initiatives, including additional funding for STEM scholarships in Washington.
  8. Financial support for the renovating and/or constructing of new campus facilities鈥攗nfortunately, Washington鈥檚 legislature did not pass a capital budget.
  9. Bills allowing individuals to carry guns on public college and university campuses鈥攁s of March 2014, seven states had passed such legislation.
  10. Legislation that extends in-state tuition or, as occurred in Washington, state financial aid to undocumented students.

Other noteworthy policy topics described in the report include:

  • Student financial aid programs鈥攕ome states broadened their programs while others limited them;
  • Online and competency-based education reciprocity agreements;
  • 鈥淧ay It Forward鈥� Funding Schemes; and
  • Consumer protection as it pertains to student recruitment, advertising and financial aid at for-profit colleges.

Congress Introduces Bills to Reauthorize Higher Education Act

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As the UW’s Office of Federal Relations reported on their , yesterday Senate Democrats released to reauthorize the Higher Education Act (HEA). Their proposal focuses on four main goals:

  • Increasing affordability and reducing college costs for students,
  • Tackling the student loan crisis by helping borrowers better manage debt,
  • Holding schools accountable to students and taxpayers, and
  • Helping students and families make informed choices.

In addition, today the House Committee on Education and the Workforce introduced reauthorization-related bills of their own, including:

For more information, check out the and a recent . 听We’ll post more information on OPBlog over the coming weeks.

Ryan Budget Would Hurt Pell Grants and Student Loans

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Representative Paul Ryan, the House Budget Chairman, released his FY15 on Tuesday. The proposal would remove the in-school interest subsidy for all subsidized undergraduate student loans, eliminate mandatory funding for Pell Grants, and freeze the maximum Pell Grant award at $5,730 for the next 10 years.

As Office of Federal Relations put it in their , 鈥淭hat essentially means that $870 in the maximum grant would have to be funded by increased discretionary funds or the maximum be cut from $5,730 to $4,860.鈥�

Please see the Federal Relations for more information, and check out articles by , , and .

New Report Suggests Graduate Student Debt Deserves Legislative Attention

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A recent report by New America, titled , reveals that much of the nation鈥檚 鈥�$1 trillion in outstanding federal student debt鈥� is the result of expensive graduate and professional degrees, rather than unaffordable undergraduate educations.

The report, which analyses recently publicized data from the Department of Education, shows that around 40 percent of recent federal loan disbursements are for graduate student debt. Moreover, the paper shows that graduate student debt across a variety of fields鈥攏ot just business school and medical school鈥攃omprises some of the largest increases in student borrowing between 2004 and 2012.听Thus, the authors recommend that legislators, journalists, and the public at large adjust their understanding of student debt to recognize that it鈥檚 not just undergraduate problem.

Most news stories highlight the debt of graduate students鈥攚hich tend to have much larger loan balances鈥攜et journalists typically don鈥檛 differentiate graduate debt from undergraduate debt.听 makes a compelling argument for why this lack of differentiation is a problem and why it deserves legislative attention:

鈥淭he failure to distinguish between undergraduate and graduate debt in discussions of college costs is a serious flaw in how we think about student debt. Students, families, and taxpayers invest significant resources in financing 鈥渃ollege,鈥� largely because a bachelor鈥檚 or associate degree is a must for anyone who wants to secure a middle-class income… But arguments for high levels of subsidy for students who attend graduate and professional school are on shakier ground. While a graduate or professional degree boosts a student鈥檚 earnings prospects and the economy at large, it is not the foundation for economic opportunity and middle-class earnings that a two- or four-year degree now provides. Students pursuing graduate degrees should be far more informed consumers. Therefore, they shouldn鈥檛 need a lot of public support to finance their next credential, which is why there are no Pell Grants for master鈥檚 degrees. That spike in debt for graduate degrees should also focus policymakers鈥� attention on an impending tidal wave of loan forgiveness for graduate students and the lack of loan limits for students pursuing graduate degrees.鈥�

You can read more about New America鈥檚 report at and .

President Obama Releases His FY2015 Budget

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Yesterday, March 4th, President Obama submitted his fiscal year 2015 budget request to Congress.听 has published their听analysis听of the budget as has .

TICAS states that the President鈥檚 proposal 鈥渢akes important steps towards making college affordable for Americans by reducing the need to borrow and making federal student loan payments more manageable.鈥� Specifically, his budget:

  • Invests in Pell Grants and prevents them from being taxed. 听The budget provides funds to cover the scheduled $100 increase in the maximum Pell award, raising it from $5,730 in 2014-15 to $5,830 in 2015-16. TICAS notes that although this increase will help nearly 9 million students, 鈥渢he maximum Pell Grant is expected to cover the smallest share of the cost of attending a four-year public college since the program started in the 1970s.鈥�
  • Makes the American Opportunity Tax Credit (AOTC) permanent. 听TICAS supports making the AOTC permanent as they note research suggests the AOTC is the most likely of the current tax benefits to increase college access and success.听 New America, however, recommends the administration convert the tax credit to a grant program as they state researchers have found grants to be a more effective way to deliver aid to low-income families.
  • Improves and streamlines income-based repayment (IBR) programs. Under the President鈥檚 budget, more borrowers would be eligible to cap their monthly payments at 10 percent of their discretionary income and have their remaining debt forgiven without taxation after 20 years.听The budget also adjusts the IBR programs to prevent debts forgiveness for high-income borrowers who can afford to pay their loans.
  • Requests funding for the College Opportunity and Graduation Bonuses.听 The budget proposes establishing College Opportunity and Graduation Bonuses, which would reward schools that enroll and graduate low-income students on time. Both TICAS and New America note that, unless this proposal is thoughtfully designed, it could incentivize schools to lower their academic standards in order to make it easier for Pell students to graduate. Further, as this proposal is one of several different efforts to reward colleges that provide affordable, quality educations, it is unclear how its goals and formulas would interact with those of initiatives like the Postsecondary Education Ratings System.

The UW鈥檚 notes that the budget also proposes $56 billion for an 鈥淥pportunity, Growth and Security Initiative,鈥� which 鈥渁ims to effectively replace the remaining FY2015 sequestration cuts for nondefense discretionary programs 鈥� the programs we care about the most.鈥� Please stay tuned to their blog for more information and updates.

“Pay It Forward鈥� Is really 鈥淧ay It Yourself and Pay More Than Ever”

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On Thursday, The Equity Line, a blog by , posted a (PIF) that discusses some of PIF鈥檚 major flaws. As a reminder, under PIF, instead of paying tuition and fees upfront, students would pay back a certain percent of their adjusted gross income for 25 years. For more information about PIF and how its supporters have applied PIF to the UW, please see the full .

The Equity Line鈥檚 blog post highlights that although PIF is marketed as a 鈥渄ebt-free鈥� way to pay for college, it is actually just another student loan program:

  • It is estimated (by the author and the UW) that many students would pay more under PIF than they currently do to pay back student loans.
  • Students with significant need 鈥� who currently receive federal, state, and institutional grants to cover tuition and fees 鈥� may have their grants (which do not need to be paid back) replaced with loans (which do).
  • Students would not be able to cover these other education costs with federal or state need-based grants because by removing the cost of tuition and fees from a student鈥檚 budget, that student鈥檚 level of calculated need would fall as would their eligibility for federal and state need programs. Thus, students would have to take out more loans (or find a way to pay upfront) for these expenses.

As the author notes, rather than 鈥淧ay It Forward,鈥� it鈥檚 really 鈥淧ay It Yourself and Pay More Than Ever.鈥�

College Board Releases 2013 Edition of 鈥淭rends in College Pricing鈥�

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The College Board released its 2013 edition of 鈥溾�� on Tuesday.听 The report provides information on what colleges and universities are charging in 2013-14; how prices vary by state, region, and institution type; pricing trends over time; and net tuition and fees鈥攚hat students and families actually pay after accounting for financial aid.

Here are a few noteworthy points about prices at public four-year institutions:

  • The average published tuition and fees for full-time resident undergraduates at public four-years increased by 2.9 percent between 2012-13 and 2013-14, going from $8,646 to $8,893鈥攖his is the smallest percentage increase in over 30 years.
  • In 2013-14, full-time students at public four-years will receive an estimated average of $5,770 in grant aid and tax benefits.
  • Thus, average net tuition and fees for full-time resident undergrads at public four-years will be about $3,120 in 2013鈥�14鈥攗p from a temporary low of $1,940 (inflation-adjusted dollars) in 2009-10.

And a few key points about private nonprofit four-year institutions:

  • The average published tuition and fees for full-time students at private nonprofit four-years increased by 3.8 percent between 2012-13 and 2013-14, going from $28,989 to $30,094.
  • In 2013-14, full-time undergrads at private nonprofit four-years will receive an estimated average of $17,630 in grant aid and tax benefits.
  • Thus, average net tuition and fees for full-time undergrads at private nonprofit four-years will be about $12,460 in 2013-14鈥攗p from a temporary low of $11,550 (inflation-adjusted dollars) in 2011-12, but down from $13,600 a decade earlier.

Average net prices in all sectors took a noteworthy dip around 2010 due, in part, to significant increases in Pell Grants and veterans benefits that occurred in 2009鈥�10 as well as the 2009 implementation of the American Opportunity Tax Credit. However, some of those benefits have been scaled back since their initial launch. Moreover, total state appropriations declined by 19 percent between 听2007-08 and 2012-13 and FTE enrollment in public institutions increased by 11 percent over that same time. Consequently, net prices have risen in the last few years for all sectors, but most noticeably in the public sector.听 It is important to remember that there are many variations by institution, region, and state.听 Even within institutions, different students pay different prices based on their financial circumstances, program of study, year in school, academic qualifications, athletic ability, etc.

See 听and 听for additional analysis and discussion of the report.