Student Loan Blues Pat Somers Ph D University

Student Loan Blues Pat Somers, Ph. D. University of Texas at Austin pasomers@mail. utexas. edu http: //www. umsl. edu/~edupsome/ http: //www. patsomers. com

Outline • • Student price response – quantitative studies Student loans – qualitative studies • • Themes: College knowledge, The U, All in the family, Special pops, Avoidance, The future, Feedback Recommendations

Student Price Response • What is it? • • • How students respond to increases in tuition and aid in enrollment and persistence decisions Expressed in percentile point changes per $100 increments In the 1980 s • • Negative response to tuition increases Positive response to grants

More price response • In the 1990 s (post-1992 Reauthorization), • • • In 2000, • • • Large positive coefficients for grants Large positive coefficients for loans Positive for tuition Negative coefficient for high accumulated debtload Smaller coefficients for aid, grants, tuition, loans Large positive coefficient for high-income students for tax credits After 2000, chose cheaper institutions?

College Knowledge • • How much do potential students know about student loans? How much do potential students know about college life?

“You’d better wake up” • • I thought you had to pay them all back at once. Like, when you graduated…. Our high school counselor didn’t know anything about financial aid. Our English teacher had to tell him.

“Ain’t no ocean wide enough” • • • This university was the closest school. . . however, [it] doesn’t offer a degree in theater. I had to change my goals [and major in] public relations. Cheap is important. I would have considered getting a medical degree if the debtload was not so tremendous. I chose [this university] for one reason: ‘cause it’s cheap. My parents appreciated the choice of a [college] close to home and [the] lower cost alternative. I’m paying my own way and I can afford the credit hours [here].

The University • What’s the university responsibility to the student?

“Can U deliver? ” • • Those admissions officers are just like used car salesmen. . [the university] told me that when you get into. . . school, there’s gonna be all kinds of scholarships and money available, and there’s not. They’ll [the university] loan you all the money you want. . the first thing they want you to do [is borrow money] especially now since all direct loans go through the schools and they’re making the money off the interest.

All in the family • How do finances affect family dynamics and decisions?

“It’s a family affair” • • • I’m working all this time, but how am I going to pay for two or three children to go to college if I’m still paying my loans? My loans pay for my child care. . . What am I supposed to do, leave the kids on the street? My credit cards pay for food. I can live on macaroni and cheese, but my kids can’t. My banker loves to see us. Between my wife and I, we owe $60, 000.

“Daddy’s gonna pay for your crashed car” (but not your tuition) • • . . . undergraduate, my parents paid for everything, so I didn’t have to take up a loan. [But when I go to graduate school] it’s loan time. My brother [and I] are both in school now, and my parents can’t afford to send both of us and pay all the costs involved. . . I have $15, 000 in loans. How am I going to pay this back? How long is it going to take to pay it back? What’s the interest on it? My parents were retired my whole B. S. degree career, so I did it on my own. I only had to take a loan my last year in [undergraduate] school because I totaled my car.

Housenote without the house • • I won’t be able to buy a car or house right away. This [student loan payment] is just like having a housenote without the house. I’m figuring about $20, 00 a year here, so that’s about $80, 000. I want to keep it under $100, 000. That’s scary; that’s a house!

“Do it for the Kids” • • • It cost a lot, but my husband I have a child that is 4. We are trying to make a better future for us and our son. That’s what’s important. That’s why we take out student loans. Student A: If you have any little children that depend on you, then you’ve got to do something. . . you will do whatever it takes, I promise. Student B: And I just thought you were waiting for the bus when I saw you standing on that street corner the other day.

Special populations • • How do minority students respond to loans? How do graduate students view their loans? How do single mothers view their loans? How do two-year students view loans?

“Our mother the mountain” • • • I mean I have to [use credit cards just] to. . . live in my house and take care of my children. . . My car is ten years old and has 177, 000 miles on it. . . my kids, I don’t also want to wait until they’re twelve to take them to Disney. I’m trying to balance between being able to do things with my kids because I don’t have a lot of time with them right now. . . there is an odd balance in there that I’m trying to achieve, and loans are working into it. We surely can get a pizza tonight because I have to say “no” to so many things, that actually a student loan would allow me to say “yes” to something. [Loans are a] great burden with a fairly high amount of stress.

“Soup is good food” (grad students) • • • . . . I was out of school for ten years before I ever came back to college. I worked for a while, put back some money, plus my parents gave me some money. Then I was on scholarship all during my undergraduate. I thought that everybody had to have loans to go through school. My mom had to have a loan to come back to school. But, I had a full scholarship because of my grades in high school. So, I didn’t have to take any [loans] out for undergraduate. . . So far I haven’t had a loan though I went through about $20, 000 of savings which is pretty well exhausted. At my age, I’m gonna be missing about five years of work. . . and I’m avoiding it [loans] as much as possible, because I really need to be building up a retirement once I get started and not paying off loans.

Two-year students • Sticker price more important than net price • • • Grants have most influence Loan avoidance [It was] an economic decision [to attend]. I wasn’t eligible for aid and this is the cheapest place to go. It’s the same education but cheaper. [I chose this college] because of location and low cost. I was able to work and go to school at the same time.

Young, gifted and Black • • Taking out loans is intimidating. But I know if I sit out of school, I’ll pay a lot more. . I don’t like debt a lot because it puts me in mind of sharecropper situations and I came from a line of sharecroppers, where these people always own you because you always owe them. You can’t go very far from them. . . [the] least painful is actually educational loans. They’re saying, pull yourself up by your boot straps. Well, I ain’t got no boots on. You’re the fellow with the boots, you pull yourself up. I need some boots first. Out of 25 grandchildren, only two of us went to college. I am the only college graduate. . . and I was able to graduate only because of loans.

The future • How do loans influence students’ future plans?

“Wedding Bell Blues” • • • [We’ll wait on] cars, a house, a baby. I would not have married the woman had I known she had defaulted on $30, 000 of student loans. (after one divorce and one bankruptcy filing) I'm getting married in June and she has no loans. . . [she’s going to] pay for everything. She's bringing all the stuff, and [I’m] bringing all the debt.

“We owe, we owe, it’s off to work we go” • • [Loans] have made me look for higher paying positions, but have also made attending college a reality for me. [Loans have] made me realize the importance of being dedicated to my studies so that I may realize the full potential of my education and get the best job possible. I hope I pay off [my student loans] in full before I die. [I’m considering] a traveling position where we can be a traveling therapist and make more money. . . you’re on the road more often, but you don’t have to pay housing costs, so basically all the money you make goes in your pocket. . . I don’t want to have this loan for thirty years, I want to pay it off.

Avoidance • • How do students avoid taking out loans? Do students choose lower-priced options?

“Just a littl’ bit” • • • . . . it was a pride thing. I wanted to get through without the loans, but I also realized it was impossible. I thought, I’ll borrow just a little bit. Now, it’s like, Oh, I’m gonna be in debt, so I’ll just borrow some more. The expenses are dirt cheap [here], but what is so funny is that we’re all sitting here taking out loans because we can’t handle it [the cost].

“Credit Card Baby” • • • Actually, I’ve charged my tuition, I’ve charged my books, I charged my food. [Even with] the amount of loan money I’m going to get this semester, I’m still gonna be $100 in the hole, and that’s just rent, electric, and phone. That’s not including food. That’s how I’m eating this semester, by charging it on my credit cards. So, you get real good at playing the interest rate game on credit cards. Why do students use credit cards rather than student loans? Desperation. You don’t have to do paperwork. Avoid the confusion and headaches. It’s easier. I know one person who had to because they didn’t get their financial aid in time, had to wait about two months, so they had to pay for school and charged it, and then by the time the money came around, they spent the money on something else. I always say you can tell who the freshman are because they push the pull doors, pull the push doors, have umbrellas when it’s raining. . . and stop at the credit card tables in the student union.

Feedback • • What do students say about policy makers? What do students say about federal practice?

“Logan to government center” • • • I’ve given up on the federal government doing anything for us. These days I just hope they don’t start taking things away There are so many people in high positions who came out of academia. . . so, you know, maybe they need to be reminded about people in universities. “Look at where you came from and remember where it got you. ” The next generation of people like you may be denied their opportunity to go to Congress, or denied their opportunity to serve the government, simply because they are working five jobs trying to pay off those debts. The mindset that government can do everything needs to be eliminated.

“Senator Speak” • • • . . . quit buying hundred dollar soap dishes for generals - they don't need them. Go to Wal-Mart and get them for $3 like the rest of us. It’s like we have nothing but buffoons in office now. They get in there and they’re strictly self-serving. They work to propagate the good-old-boy system. . . like the Congressional pension; it’s ludicrous. They should have a pension that should be equal to something you’d get in business. . . I think we’re going to hit critical mass one of these days where there is no longer gonna be anybody there to pay the piper. You can’t keep deferring things, like we’re putting things off now on the next generation. The waste in the student loan program is a drop in the bucket. Go after the rest [of the abuse] first.

Recommendations • • Grants for low-income and first-gen students Sticker price considerations for two-year students Strategy (high tuition, high aid, etc. ) Loan forgiveness in strategic areas

Parting songs

“Help, I need somebody” • Who is your safety net? • • • [The] police. The good Lord. If times get tough, I’ll just have to quit.

“Money can’t buy you love” • • • I am an investment. I hope to pay off my student loans before I die. The benefit [of education] far outweighs the cost.

My little deuce coupe • I’ve got a truckload of debtload!”