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The Economic Diversity web site now includes the average student loan debt for the 2005 graduating class as reported by 1,421 four-year institutions. Also included is the proportion of graduates with any student loans. The site provides access to these data (as well as comparable figures for 2000 and 2004) through an agreement with college guide publisher Thomson Peterson's. (The data are copyright 2006 Thomson Peterson's, a part of Thomson Learning Inc. All rights reserved.) Using the new 2005 data, we constructed statewide enrollment-weighted averages for all 50 states and the District of Columbia. The state averages will be posted tomorrow on our sister site, the Project on Student Debt, along with a brief report. The five states with the highest average cumulative student debt are New Hampshire, Iowa, North Dakota, Rhode Island and Pennsylvania. The five lowest are Utah, Hawaii, Delaware, Maryland, and California. These data aren't perfect. Colleges are asked to report the total federal and private student loans taken out by graduating seniors while they attended that institution. This means that prior borrowing by students who transfer is not included. Actual debt may also be higher due to private loans taken out by the students but not handled by the campus financial aid office (and therefore not in the campus' records).

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Companies offering private student loans advertise low rates, but the rates they actually charge to individual borrowers, and how they determine those rates, are closely-held trade secrets. The rates are based on borrower credit scores and other factors; ultimately, companies maximize their returns by trying to charge the highest rate they can while still getting the business. One way to determine the actual rates being charged on private student loans is to review the prospectuses that accompany portfolios of loans that are sold to investors. We looked at four recent portfolios from Sallie Mae, and one Fitch Ratings review of a portfolio from the National Collegiate Student Loan Trust. These portfolios revealed average interest rates today of 9.77%, 9.91%, 10.0%, 10.11% and 10.35% (based on a today's Prime rate of 8.25% and a 3-month LIBOR rate of 5.47%). Many borrowers, at least 15% of them according to the investor reports, are charged interest rates of more than 12%. These rates are variable, so as interest rates in the economy increase, so do the rates paid by the borrowers.

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One well-documented obstacle to economic diversity is the financial aid application process itself: the FAFSA is incredibly long, confusing and intimidating. When low-income students don't apply for financial aid, they miss out on resources that could increase their chances of success in college by allowing them to go to school full time, work reasonable hours, and attend more supportive institutions. In a paper published this April, Harvard economists Susan Dynarski and Judith Scott-Clayton examine how the FAFSA can be a barrier to access and aid. Among their findings: "the basic step of locating financial records is an obstacle for poor students, due to higher mobility rates and family dysfunctions such as divorce and separation of children from parents." A recent ACE report found that nearly two million Pell-eligible students did not apply for financial aid in 2003-04. For the lowest income students, financial aid application rates are flat (for dependents) or declining (for independents), even as overall aid application rates rise. Calls for FAFSA simplification usually focus on changing the formula that determines aid eligibility, so that it requires less data from students and parents. These proposals rarely make headway because they require difficult and politicized choices about eligibility, equity and cost. The good news is that there's a very practical way to make the FAFSA easier for students and families to use, regardless of the underlying formula. That's because the government already has some of the most important information used to calculate eligibility. Instead of having to dig through piles of tax records and do complex calculations, applicants could simply provide access to their IRS transcripts. The data could be processed electronically, eliminating many of the most difficult FAFSA questions and worksheets. People routinely give this permission when they apply for loans, and many commercial entities use this tool to verify income information. There's even a line on the IRS transcript request form that says: "If the transcript or tax information is to be mailed to a third party (such as a mortgage company), enter the third party's name, address, and telephone number." The private contractors running the Federal Direct Loan Program already use a consent form to access Income Contingent Repayment Plan users' IRS data. And some local governments have incorporated the IRS form into applications for benefits for working poor families. So, why not build it into the FAFSA itself, and lower a barrier to access?

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In the Chronicle of Higher Education's excellent series on low-income and working class students in college, the editors included rankings of elite colleges' enrollments of Pell grant recipients. The Pell grant data that is available from the U.S. Department of Education is for an entire academic year -- in other words, all the students who received a grant during any term, including the summer. Yet the denominator chosen by the Chronicle -- the enrollment for determining the percentage of Pell recipients -- is Fall only. Generally, at highly selective colleges, most students start in the fall and stay, so there's not a big difference between Fall enrollment and 12-month unduplicated total enrollment. But some campuses have more students who start in other terms. Those potential Pell recipients are included in the numerator (Education Department's Pell numbers), but not in the Chronicle's Fall denominator, causing the percentage to be higher than it should be. Given the fine gradation of the Chronicle's rankings (as small as 1/10 of one percent), this makes a difference in the rankings. In our database, for example, Baylor University jumps up almost two full percentage points when Fall enrollment is used as the denominator instead of the more appropriate 12-month number. There's another wrinkle in these types of rankings. Most students attending elite colleges are dependent students, and therefore their parents' income is included in determining whether they come from a less advantaged background. Once a student turns 24, however, they become independent, and may suddenly qualify for a Pell grant because they have very little income of their own. More independent students qualify for Pell than dependent students. That's why our database includes an estimate of the proportion of dependent students at income levels below $30,000 and between $30,000 and $60,000. Again, looking at the campuses ranked by the Chronicle, some of the results would be different if they asked which campuses enroll more traditional-age undergraduates with incomes below $60,000. The flagship public institutions in Nebraska, Texas and Illinois all do significantly better under this alternative measure. Among private institutions, Stanford, the University of Chicago, Carleton and Pomona all move up significantly when using the estimates focused on dependent students only. Thanks to University of Virginia economist Sarah Turner for pointing to these issues in her letter-to-the-editor in the Chronicle.

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The economicdiversity.org database includes campus-by-campus data on the total student loan debt of graduating seniors. The numbers come from the Common Data Set, and are reported by the campuses to the various publishers of college guides. The instructions to campuses tell them to include private loans in the total. But at a recent meeting between campus data-keepers and the publishers, it became clear that some campuses have a better handle than others on the amount of private loans being made to their students. To be clearer about the totals in future data collections, the Common Data Set will, in the future, ask campuses to provide separate totals for federal and private loans; some campuses will input a "not available" in the private loan field. One solution to this data problem would be for the feds to require that private loans be certified by the college in order to qualify for the tax deduction on student loan interest. That way, financial aid administrators would be able to track who has private loans, and how much students have truly borrowed. They would also be able to check to make sure that the student isn't making a mistake by signing up for a high-rate or otherwise undesirable loan. This might also help borrowers down the line, since many don't know the differences between federal and private loans, and are unclear as to which they have. If aid administrators had more information, they could more easily advise students about the risks and tradeoffs of alternative loans.

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Three disturbing stories about the rise of private student loans: When a borrower defaults on a federal loan, it affects the school's overall default rate, which the federal government uses as an indicator of school quality. Willis Hulings, CEO of TERI, a nonprofit guarantor of private loans, told an industry conference recently that some schools are turning to private loans in order to dodge the federal default triggers. The way I heard it from another source, some schools with borderline high default rates in the federal loan program steer particular students -- those they fear will default -- to private loans so that a default won't show up in the federal numbers. If, in fact, the student is a default risk, then it is likely that the lender is charging a very high interest rate (unless the borrower has a creditworthy cosigner). I would bet this second situation is more common: private loans being used for students who don't qualify for federal loans because they are not making "satisfactory academic progress." A student task force at the University of Nevada, Reno, reported that as true there. Schools decide what is "satisfactory," and in UNR's case it's a 2.0 GPA. So, essentially, students who are at a high risk of flunking out and not ultimately earning the salaries that will allow them to pay off student loans are getting high-rate private loans. Yikes. I hope their parents are the cosigners. A third story from a reliable source. Private colleges encourage low-income students to enroll. Instead of putting together a full financial aid package, college officials suggest they go ahead and attend, paying tuition on an installment plan, which is commonly offered at many colleges. The students complete the coursework, but cannot pay the tuition, and ultimately determine that they cannot afford to continue at the college. So they decide to transfer to a lower-tution option. But they can't transfer, because the college won't release the transcripts until they've paid the tuition. They're stuck. To some degree, these types of problems can be reduced through vigilant oversight by regulators and the media. One good example is the private loan scandal at Lehigh Valley College in Pennsylvania last year.

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"Working Class Students Feel the Pinch" in the Chronicle of Higher Education on June 9. This article is about how the financial aid formula can work against working-class students who work hard to pay for school. Here's an excerpt until we get a free link (the Chronicle is subscription only):
While there is no formal definition of working-class students, experts commonly use those from lower-middle-income families with incomes between $30,000 and $50,000 a year, as a substitute. The proportion of bachelor's degrees going to students from those families has declined over the past 25 years, from about 15 percent of all B.A. degrees earned in 1980 to about 11 percent in 2004. Comparatively, the share of the degrees going to students from more affluent families has risen to 79 percent from 72 percent over that period.
Working-class students are not well served, financial-aid experts say, by a student-aid system created by the federal government in the 1960s and 70s to help make college more affordable for students from low- and middle-income backgrounds. When the formula the government uses to assess a student's need was put into place, most students came from traditional two-parent families who could pay at least a portion of their children's college bills, and fewer students worked full time while enrolled in college. Those expectations were written into the formula, and, as a result, students are essentially penalized for working long hours to pay their way through college.
The only place to find comparative data on students with family incomes between $30,000 and $60,000 is at EconomicDiversity.org. "Working-Class Students Increasingly End Up at Community Colleges, Giving Up on a 4-Year Degree" in the Chronicle of Higher Education on June 9 looks at how finances and socio-economic status are increasing factors in college choice. Just as Tally Hart and Ken Redd warned, some students are choosing community colleges for economic reasons and not pursuing four-year degrees. "Opening Up the Elites" in Inside Higher Ed on June 2 focuses on discussions from a conference put on by the Education Testing Service and the Carnegie Foundation for the Advancement of Teaching. The article talks about different strategies to increase low-income access to higher ed, the role of assessment, and the disproportionate focus on elite private institutions when it comes to economic diversity. Lots of lively comments at the end of the article. "Class Matters" in the Boston Globe on May 13. Now that some elite institutions are making an effort to enroll more lower income students, those students encounter social challenges as they try to fit in with a dominant culture of affluence and privilege. Students at Yale have formed a support group and are profiled in this story. "Elite Colleges Lag in Serving the Needy" in the Chronicle of Higher Education on May 12 examines the numbers of low income students at elite colleges. The article is a good survey of the state of economic diversity in higher education today.

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Private student loans are not just an asterisk in the loan data anymore. And they're not just for law and med students, either. According to our Project on Student Debt, the numbers in 2003-4 stood at: --5% of students in public four-year colleges took out private loans (compared to 43% federal); --11% of students in private four-year colleges (compared to 54% federal); and, --15% of students at for-profit colleges had private loans (compared to 80% federal). Are those numbers going to continue to rise? At an industry conference a few days ago, more than one expert predicted that private student loans could overtake federally-backed loans in six or seven years' time. Getting accurate, up-to-date data on private loans is tricky. Those 2003-4 figures are from a survey conducted by the National Center for Education Statistics -- but the surveys are conducted only every few years. What has happened with private loans in 2005 and 2006? For 2005, the College Board estimated, based on a survey of loan companies, a one-year increase of 30 percent in private loans. Colleges continue to report (and sometimes facilitate) the growth in private loans. According to a student task force report posted on Student Debt Alert, UMass Boston had a 56% increase in the number of private loans between 2003-4 and 2004-5 (from 368 to 576). At the lender conference I attended, the financial aid director from Michigan State University reported an increase in private loans from $12.7 million in 2004, to $20.6 million in 2006, a 63% increase. Schools do not necessarily know whether their students have taken out alternative student loans. Some loans are made through the financial aid office. But a number of lenders are direct-to-consumer ("DTC" in the lender world). They require some proof of enrollment, but in some cases that can be a copy of paid tuition bill, or just an electronic data match with the National Student Clearinghouse. In those cases, the loans won't show up in schools' tallies of loans to their students.

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The Education Writers Association just had their national conference in New Orleans. One of the sessions was called "How the Game is Played in Enrollment Management -- is richer always better?" Panelists included Tally Hart, outgoing Director of Financial Aid at Ohio State University; Ken Redd, Director of Research and Policy Analysis at NASFAA; and Matthew Quirk, a reporter-researcher at the Atlantic Monthly. Quirk has written an in-depth article about enrollment management, an important piece of the financial aid and admissions puzzle that increasingly influences economic diversity at colleges across the country. The discussion focused on the effect of enrollment management techniques on economic diversity and access for low-income students. All three panelists agreed that financial aid is increasingly used as a carrot to attract certain types of students to an institution, rather than simply a way to help lower income students afford college. Nationally, only 2/3 of financial aid dollars go to financially needy students. Enrollment managers can engineer the admissions and financial aid processes to increase tuition revenue, raise a school's US News ranking, attract more academically high-performing students, or increase ethnic and/or economic diversity. Panelists agreed that good enrollment management should also be about retention, success, and persistence. Quirk said it is three times more expensive to recruit a student than to retain one. Redd and Hart spoke about the problem of qualified students passing up competitive institutions for cheaper, less challenging ones due to financial concerns. When students downsize their aspirations, they are less successful, Hart said. The panel discussed the elite colleges' competing programs to attract low-income students. They expressed some concern that intense media coverage of these efforts may overshadow other (often more affordable) methods of increasing economic diversity.

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Another source of useful data on college students' family income is the CIRP Freshman Survey, developed by the Higher Education Research Institute (HERI) at UCLA. Each year, colleges across the country administer the CIRP survey to their incoming freshmen, asking them about a range of topics, including family income. HERI compiles the responses into a national report. Each participating campus receives its own results along with comparisons to peer institutions. Campuses decide whether to make their own reports available, and some have done so. For example, Emory University has made selected findings from its 2005 survey available online. The report indicates that a majority of the students have parents with graduate degrees, and 39% report family incomes of more than $200,000, a larger proportion than peer institutions. In comparison, Northwestern University's report shows 30% of freshmen with family incomes above $200,000, and 63% above $100,000. Compare those figures with Census data showing that only 3.5% of families in the U.S. earn more than $200,000, and only 20% earn more than $100,000. Other campuses that have posted some or all of their Freshman Survey results are listed below. A note and link also appear on these campuses' institutional profiles at economicdiversity.org. Full reports Berea College, 2004 Cornell University, multiple years Hampden-Sydney College, 2000 Indiana University of Pennsylvania, 2001 Iowa State University, 2003 Northwestern University, 2005 Purdue University, multiple years University of Minnesota, multiple years Executive summaries/partial data: Bryn Mawr College, 2004 (Full data for selected categories, not socio-economic) Calvin College, 2002 (executive summary, some socio-economic data) Case Western Reserve University, 2000 (one-page summary, no socio-economic data) Central Washington University, 1998 (summary, includes socio-economic data) Dartmouth College, 2003 (selected findings, summary of socio-economic data) East Texas Baptist University, 2002 (executive summary, sparse socio-economic details) Emory University, 2003 (selected findings, includes socio-economic data) Florida International University, 2000 (executive summary, some socio-economic data) Massachussets Institute of Technology, 1998 (selected findings, summary of socio-economic data) Montclair State Unversity, 1991 and 2001 (executive summary, some socio-economic data) Morningside College, 2004 (highlights in powerpoint presentation) Oklahoma State University, multiple years (selected findings, some socio-economic data) Oregon State University, 2002 (executive summary, sparse socio-economic data) Roanoke College, 2002 (some socio-economic data, all in percentages) Southwest Minnesota State University, 2003 (executive summary, some socio-economic data) Sweet Briar College, 2004 (summary, no socio-economic data) Texas State University at San Marcos, 2000 (summary, some socio-economic data) Texas Tech University, 2003 (executive summary, some socio-economic data) University of California at Santa Cruz, 2002 (executive summary, sparse socio-economic data) University of Idaho, 2002 (executive summary, some socio-economic data) University of North Carolina at Chapel Hill, 1999-2004 (summary graphs, some socio-economic data) University of North Dakota, 2002 (summary, no socio-economic data) University of South Carolina, 1999 (selected findings, includes socio-economic data) University of Wisconsin at Milwaukee, 2004 (executive summary, some socio-economic data) Want to know whether a particular campus has participated in the CIRP survey? See the list of CIRP participating campuses. If you know of a school not listed here whose CIRP data is public, please comment on this thread and post a link.

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