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DOES GROWING STUDENT
DEBT SIGNAL THAT COLLEGE
IS UNAFFORDABLE?
SANDY BAUM
GEORGE WASHINGTON UNIVERSITY
GRADUATE SCHOOL OF EDUCATION
CUNY HIGHER EDUCATION POLICY SEMINAR
MARCH 2013
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IS COLLEGE AFFORDABLE?
Most people say no.
But what does this mean?
Published price / family income – a good measure?
Incorporating pre-college and post-college circumstances
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IS THERE A
STUDENT DEBT CRISIS?
• $1 trillion
• The economy
• The press
• The real problems
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COLLEGE PRICES
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AVERAGE PUBLISHED CHARGES FOR
FULL-TIME UNDERGRADUATES BY TYPE AND CONTROL OF INSTITUTION, 2012-13 (ENROLLMENT-WEIGHTED)
SOURCE: The College Board, Trends in College Pricing 2012, Table 1A.
Tuition and Fees Room and Board Total Charges
Sector 2012-13 2011-12 $
Change
%
Change 2012-13 2011-12
$
Change
%
Change 2012-13 2011-12
$
Change
%
Change
Public Two-
Year In-State $3,131 $2,959 $172 5.8% $7,419 $7,332 $87 1.2% $10,550 $10,291 $259 2.5%
Public Four-
Year In-State $8,655 $8,256 $399 4.8% $9,205 $8,880 $325 3.7% $17,860 $17,136 $724 4.2%
Public Four-
Year Out-of-
State
$21,706 $20,823 $883 4.2% $9,205 $8,880 $325 3.7% $30,911 $29,703 $1,208 4.1%
Private
Nonprofit
Four-Year
$29,056 $27,883 $1,173 4.2% $10,462 $10,088 $374 3.7% $39,518 $37,971 $1,547 4.1%
For-Profit $15,172 $14,737 $435 3.0% — — — — — — — —
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AVERAGE ANNUAL PERCENTAGE INCREASES IN INFLATION-ADJUSTED
PUBLISHED PRICES BY DECADE, 1982-83 TO 2012-13
SOURCE: The College Board, Trends in College Pricing 2012, Figure 4.
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DISTRIBUTION OF FULL-TIME UNDERGRADUATES AT 4-YEAR
INSTITUTIONS BY PUBLISHED TUITION & FEES, 2012-13
SOURCE: The College Board, Trends in College Pricing 2012, Figure 2.
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IN-STATE TUITION & FEES AT FLAGSHIP UNIVERSITIES, BY STATE, 2012-13
AND 5-YEAR PERCENTAGE CHANGE IN
INFLATION-ADJUSTED TUITION & FEES, 2007-08 TO 2012-13
SOURCE: The College Board, Trends in College Pricing 2012, Figure 8.
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PUBLISHED TUITION & FEES, NET TUITION & FEES, AND ROOM & BOARD
IN 2012 DOLLARS, FULL-TIME UNDERGRADUATE STUDENTS
AT PUBLIC INSTITUTIONS, 1992-93, 1997-98, 2002-03, 2007-08, & 2012-13
SOURCE: The College Board, Trends in College Pricing 2012, Figure 9.
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PUBLISHED TUITION & FEES, NET TUITION & FEES, AND ROOM & BOARD IN 2012 DOLLARS, FULL-TIME UNDERGRADUATE STUDENTS AT
PRIVATE NONPROFIT FOUR-YEAR INSTITUTIONS,
1992-93, 1997-98, 2002-03, 2007-08, AND 2012-13
SOURCE: The College Board, Trends in College Pricing 2012
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AVERAGE AID PER FULL-TIME EQUIVALENT (FTE)
UNDERGRADUATE STUDENT IN 2011 DOLLARS,
1996-97 TO 2011-12
SOURCE: The College Board, Trends in Student Aid 2012, Figure 3A.
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AVERAGE AID PER FULL-TIME EQUIVALENT GRADUATE STUDENT
IN 2011 DOLLARS, 1996-97 TO 2011-12
SOURCE: The College Board, Trends in Student Aid 2012, Figure 3B.
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STUDENT DEBT
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UNDERSTANDING DEBT FINANCING
• When is debt a good idea? A bad idea?
--Houses
--Cars
--Consumer durables
--Vacations
--Small businesses
• Interest rates
• Inflation
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OUTSTANDING STUDENT LOAN BALANCES
19
Figure 2
Outstanding Student Loan Debt
Source: Federal Reserve Bank of New York
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$trillions $trillions
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CONSUMER DEBT
(IN TRILLIONS OF DOLLARS)
Source: Federal Reserve Bank of NY
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
2003 2004 2005 2006 2007 2008 2009 2020 2011 2012
Other
Student Loan
Credit Card
Auto Loan
HE Revolving
Mortgage
Student Loan $0.2 $0.3 $0.4 $0.4 $0.5 $0.6 $0.7 $0.8 $0.9 $1.0
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DEBT LEVELS:
FED REPORT
• Median with debt: $13,662
• Mean with debt: $24,218.
• About 3 % of borrowers have six-figure student loan
debt.
• 0.5% have debt over $200,000.
• 25% of borrowers > $29,155
• 25% < $5,977
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GROWTH OF FEDERAL AND NONFEDERAL LOAN DOLLARS IN 2011 DOLLARS, 1991-92 TO 2011-12, SELECTED YEARS
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TOTAL NUMBER OF STAFFORD LOAN BORROWERS AND
AVERAGE AMOUNT BORROWED, 2001-02 TO 2011-12
SOURCE: The College Board, Trends in Student Aid 2012, Figure 7B.
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AVERAGE TOTAL DEBT LEVELS OF BACHELOR’S DEGREE RECIPIENTS,
PUBLIC FOUR-YEAR COLLEGES & UNIVERSITIES,
IN 2011 DOLLARS, 1999-2000 TO 2010-11
SOURCE: The College Board, Trends in Student Aid 2012, Figure 12A.
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AVERAGE TOTAL DEBT LEVELS OF BACHELOR’S DEGREE RECIPIENTS,
PRIVATE NONPROFIT FOUR-YEAR COLLEGES & UNIVERSITIES,
IN 2011 DOLLARS, 1999-2000 TO 2010-11
SOURCE: The College Board, Trends in Student Aid 2012, Figure 12B.
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SECTOR LAST ATTENDED AS OF 2009
AMONG BACHELOR’S DEGREE RECIPIENTS WHO FIRST ENROLLED IN 2003-04,
BY TOTAL AMOUNT BORROWED
(AND OVERALL PERCENTAGE OF STUDENTS IN DEBT CATEGORY)
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FEDERAL STUDENT LOAN TWO-YEAR COHORT
DEFAULT RATE (CDR), 1987–2010
.
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TWO-YEAR COHORT DEFAULT RATE BY SECTOR,
2000, 2009 AND 2010, AND THREE-YEAR COHORT
DEFAULT RATE BY SECTOR, 2009
.
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COUNTERFACTUAL
• Same education, no debt.
• No education, no debt.
• Other?
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DEFINING AFFORDABILITY
• Paying out of current income?
• Investment vs consumption
• Housing / health care
• Subjectivity
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IS COLLEGE AFFORDABLE?
Role of preferences and priorities
(subjective)
Health care:
uninsured afforders
insured non-afforders
Role of uncertainty (completion, earnings)
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PERCENTAGE CHANGE IN INFLATION-ADJUSTED MEAN
FAMILY INCOME BY QUINTILE,
1981–1991, 1991–2001, AND 2001–2011
SOURCE: The College Board, Trends in College Pricing 2012, Figure 18A.
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PERCENTAGE CHANGE IN INFLATION-ADJUSTED MEAN FAMILY INCOME
BY QUINTILE, 1981–1991, 1991–2001, AND 2001–2011
SOURCE: The College Board, Trends in College Pricing 2012, Figure 18A table
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AVERAGE ESTIMATED FULL-TIME UNDERGRADUATE
BUDGETS,
2012-13 (ENROLLMENT-WEIGHTED)
SOURCE: The College Board, Trends in College Pricing 2012
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AFFORDABILITY
• Unaffordable vs. expensive
• Consumption vs. investment
• Parents vs. students
• Perception vs. actual / sticker price vs. net price
• Role of living costs
• Uncertainty
• Role of preferences / priorities
• Wage differentials vs. return to education
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Sandy Baum
Is College Affordable? In Search of a Meaningful Definition
IHEP Issue Brief
Toward a Reliastic Conception of Postsecondary Affordability
GW: GSEHD working papers
How Much Debt is Too Much?
http://ticas.org/files/pub/Manageable_Debt_FINAL_4.20.06.pdf
Trends in Student Aid
Trends in College Pricing
trends.collegeboard.org