Student Loan BluesStudent Loan Blues

Pat Somers, Ph.D.Pat Somers, Ph.D.University of Texas at AustinUniversity of Texas at Austin

pasomers@mail.utexas.edupasomers@mail.utexas.edu

http://www.umsl.edu/~edupsome/http://www.umsl.edu/~edupsome/

http://www.patsomers.comhttp://www.patsomers.com

OutlineOutline

• Student price response – quantitative Student price response – quantitative studiesstudies

• Student loans – qualitative studiesStudent loans – qualitative studies• Themes: College knowledge, The U, All in the Themes: College knowledge, The U, All in the

family, Special pops, Avoidance, The future, family, Special pops, Avoidance, The future, FeedbackFeedback

• Recommendations Recommendations

Student Price ResponseStudent Price Response

• What is it?What is it?• How students respond to increases in How students respond to increases in

tuition and aid in enrollment and tuition and aid in enrollment and persistence decisionspersistence decisions

• Expressed in percentile point changes per Expressed in percentile point changes per $100 increments$100 increments

• In the 1980sIn the 1980s• Negative response to tuition increasesNegative response to tuition increases• Positive response to grantsPositive response to grants

More price responseMore price response

• In the 1990s (post-1992 Reauthorization),In the 1990s (post-1992 Reauthorization),• Large positive coefficients for grantsLarge positive coefficients for grants• Large positive coefficients for loansLarge positive coefficients for loans• Positive for tuitionPositive for tuition• Negative coefficient for high accumulated debtloadNegative coefficient for high accumulated debtload

• In 2000, In 2000, • Smaller coefficients for aid, grants, tuition, loansSmaller coefficients for aid, grants, tuition, loans• Large positive coefficient for high-income students Large positive coefficient for high-income students

for tax creditsfor tax credits• After 2000, chose cheaper institutions?After 2000, chose cheaper institutions?

College KnowledgeCollege Knowledge

• How much do potential students know How much do potential students know about student loans?about student loans?

• How much do potential students know How much do potential students know about college life?about college life?

““You’d better wake up”You’d better wake up”

• I thought you had to pay them all back at I thought you had to pay them all back at once. Like, when you graduated….once. Like, when you graduated….

• Our high school counselor didn’t know Our high school counselor didn’t know anything about financial aid. Our English anything about financial aid. Our English teacher had to tell him.teacher had to tell him.

““Ain’t no ocean wide enough”Ain’t no ocean wide enough”• This university was the closest school. . .however, [it] This university was the closest school. . .however, [it]

doesn’t offer a degree in theater. I had to change my doesn’t offer a degree in theater. I had to change my goals [and major in] public relations.goals [and major in] public relations.

• Cheap is important. I would have considered getting Cheap is important. I would have considered getting a medical degree if the debtload was not so a medical degree if the debtload was not so tremendous.tremendous.

• I chose [this university] for one reason: ‘cause it’s I chose [this university] for one reason: ‘cause it’s cheap.cheap.

• My parents appreciated the choice of a [college] My parents appreciated the choice of a [college] close to home and [the] lower cost alternative.close to home and [the] lower cost alternative.

• I’m paying my own way and I can afford the credit I’m paying my own way and I can afford the credit hours [here].hours [here].

The UniversityThe University

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

““Can U deliver?”Can U deliver?”

• Those admissions officers are just like used car Those admissions officers are just like used car salesmen.salesmen.

• . . .[the university] told me that when you get . . .[the university] told me that when you get into. . .school, there’s gonna be all kinds of into. . .school, there’s gonna be all kinds of scholarships and money available, and therescholarships and money available, and there’’s not.s not.

• TheyThey’’ll [the university] loan you all the money you ll [the university] loan you all the money you want.want.

• . . .the first thing they want you to do [is borrow . . .the first thing they want you to do [is borrow money] especially now since all direct loans go money] especially now since all direct loans go through the schools and theythrough the schools and they’’re making the money re making the money off the interest.off the interest.

All in the familyAll in the family

• How do finances affect family dynamics How do finances affect family dynamics and decisions?and decisions?

““It’s a family affair”It’s a family affair”

• I’m working all this time, but how am I going I’m working all this time, but how am I going to pay for two or three children to go to to pay for two or three children to go to college if I’m still paying my loans?college if I’m still paying my loans?

• My loans pay for my child care. . .What am I My loans pay for my child care. . .What am I supposed to do, leave the kids on the street? supposed to do, leave the kids on the street? My credit cards pay for food. I can live on My credit cards pay for food. I can live on macaroni and cheese, but my kids can’t.macaroni and cheese, but my kids can’t.

• My banker loves to see us. Between my wife My banker loves to see us. Between my wife and I, we owe $60,000.and I, we owe $60,000.

““Daddy’s gonna pay for Daddy’s gonna pay for your crashed car”your crashed car”

(but not your tuition)(but not your tuition)

• . . .undergraduate, my parents paid for everything, so I didn. . .undergraduate, my parents paid for everything, so I didn’’t t have to take up a loan. [But when I go to graduate school] ithave to take up a loan. [But when I go to graduate school] it’’s s loan time.loan time.

• My brother [and I] are both in school now, and my parents canMy brother [and I] are both in school now, and my parents can’’t t afford to send both of us and pay all the costs involved. . .I have 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 $15,000 in loans. How am I going to pay this back? How long is it going to take to pay it back? Whatit going to take to pay it back? What’’s the interest on it?s the interest on it?

• My parents were retired my whole B.S. degree career, so I did it My parents were retired my whole B.S. degree career, so I did it on my own. on my own. 

• I only had to take a loan my last year in [undergraduate] school I only had to take a loan my last year in [undergraduate] school because I totaled my car.because I totaled my car.

Housenote without Housenote without the housethe house

• I won’t be able to buy a car or house I won’t be able to buy a car or house right away. This [student loan payment] right away. This [student loan payment] is just like having a housenote without is just like having a housenote without the house.the house.

• I’m figuring about $20,00 a year here, I’m figuring about $20,00 a year here, so that’s about $80,000. I want to keep so that’s about $80,000. I want to keep it under $100,000. That’s scary; that’s a it under $100,000. That’s scary; that’s a house!house!

““Do it for the Kids”Do it for the Kids”

• It cost a lot, but my husband and I have a child that is It cost a lot, but my husband and I have a child that is 4. We are trying to make a better future for us and 4. We are trying to make a better future for us and our son. Thatour son. That’’s whats what’’s important. That’s why we s important. That’s why we take out student loans.take out student loans.

• Student AStudent A: If you have any little children that depend : If you have any little children that depend on you, then youon you, then you’’ve got to do something. . .you will ve got to do something. . .you will do whatever it takes, I promise. do whatever it takes, I promise. 

• Student B:Student B: And I just thought you were waiting for the And I just thought you were waiting for the bus when I saw you standing on that street corner the bus when I saw you standing on that street corner the other day.other day.

Special populationsSpecial populations

• How do minority students respond to How do minority students respond to loans?loans?

• How do graduate students view their How do graduate students view their loans?loans?

• How do single mothers view their How do single mothers view their loans?loans?

• How do two-year students view loans?How do two-year students view loans?

““Our mother the Our mother the mountain”mountain”

• I mean I have to [use credit cards just] to . . .live in my I mean I have to [use credit cards just] to . . .live in my house and take care of my children. . . house and take care of my children. . .

• My car is ten years old and has 177,000 miles on 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 it. . .my kids, I don’t also want to wait until they’re twelve to take them to Disney. I’m trying to balance twelve to take them to Disney. I’m trying to balance between being able to do things with my kids because I between being able to do things with my kids because I don’t have a lot of time with them right now. . .there is 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 an odd balance in there that I’m trying to achieve, and loans are working into it. We surely can get a pizza loans are working into it. We surely can get a pizza tonight because I have to say “no” to so many things, tonight because I have to say “no” to so many things, that actually a student loan would allow me to say “yes” that actually a student loan would allow me to say “yes” to something.to something.

• [Loans are a] great burden with a fairly high amount of [Loans are a] great burden with a fairly high amount of stress.stress.

““Soup is good food”Soup is good food”(grad students)(grad students)

• . . .I was out of school for ten years before I ever came back to . . .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 college. I worked for a while, put back some money, plus my parents gave me some money. Then I was on scholarship all parents gave me some money. Then I was on scholarship all during my undergraduate.during my undergraduate.

• I thought that everybody had to have loans to go through school. 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 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 a full scholarship because of my grades in high school. So, I didndidn’’t have to take any [loans] out for undergraduate. . .t have to take any [loans] out for undergraduate. . .

• So far I havenSo far I haven’’t had a loan though I went through about $20,000 t had a loan though I went through about $20,000 of savings which is pretty well exhausted. At my age, Iof savings which is pretty well exhausted. At my age, I’’m gonna m gonna be missing about five years of work. . .and Ibe missing about five years of work. . .and I’’m avoiding it [loans] m avoiding it [loans] as much as possible, because I really need to be building up a as much as possible, because I really need to be building up a retirement once I get started and not paying off loans.retirement once I get started and not paying off loans.

Two-year studentsTwo-year students

• Sticker price more important than net priceSticker price more important than net price• Grants have most influenceGrants have most influence• Loan avoidanceLoan avoidance

• [It was] an economic decision [to attend]. I [It was] an economic decision [to attend]. I wasn’t eligible for aid and this is the cheapest wasn’t eligible for aid and this is the cheapest place to go.place to go.

• It’s the same education but cheaper.It’s the same education but cheaper.• [I chose this college] because of location and [I chose this college] because of location and

low cost. I was able to work and go to school low cost. I was able to work and go to school at the same time.at the same time.

Young, gifted and BlackYoung, gifted and Black

• Taking out loans is intimidating. But I know if I sit out of school, Taking out loans is intimidating. But I know if I sit out of school, II’’ll pay a lot more.ll pay a lot more.

• . . . I don. . . I don’t’t like debt a lot because it puts me in mind of like debt a lot because it puts me in mind of sharecropper situations and I came from a line of sharecropper situations and I came from a line of sharecroppers, where these people always own you because sharecroppers, where these people always own you because you always owe them. You canyou always owe them. You can’’t go very far from them. . .[the] t go very far from them. . .[the] least painful is actually educational loans. least painful is actually educational loans.

• TheyThey’’re saying, pull yourself up by your boot straps. Well, I ainre saying, pull yourself up by your boot straps. Well, I ain’’t t got no boots on. Yougot no boots on. You’’re the fellow with the boots, you pull re the fellow with the boots, you pull yourself up. I need some boots first.yourself up. I need some boots first.

• Out of 25 grandchildren, only two of us went to college. I am the Out of 25 grandchildren, only two of us went to college. I am the only college graduate. . .and I was able to graduate only only college graduate. . .and I was able to graduate only because of loans.because of loans.

The futureThe future

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

““Wedding Bell Blues”Wedding Bell Blues”

• [We’ll wait on] cars, a house, a baby.[We’ll wait on] cars, a house, a baby.• I would not have married the woman had I I would not have married the woman had I

known she had defaulted on $30,000 of known she had defaulted on $30,000 of student loans. (after one divorce and one student loans. (after one divorce and one bankruptcy filing)bankruptcy filing)

• I'm getting married in June and she has no I'm getting married in June and she has no loans. . .[she’s going to] pay for everything. loans. . .[she’s going to] pay for everything. She's bringing all the stuff, and [I’m] bringing She's bringing all the stuff, and [I’m] bringing all the debt.all the debt.

““We owe, we owe, We owe, we owe, it’s off to work we go”it’s off to work we go”

• [Loans] have made me look for higher paying positions, but [Loans] have made me look for higher paying positions, but have also made attending college a reality for me.have also made attending college a reality for me.

• [Loans have] made me realize the importance of being [Loans have] made me realize the importance of being dedicated to my studies so that I may realize the full potential of dedicated to my studies so that I may realize the full potential of my education and get the best job possible. my education and get the best job possible. 

• I hope I pay off [my student loans] in full before I die.I hope I pay off [my student loans] in full before I die.• [I’m considering] a traveling position where we can be a [I’m considering] a traveling position where we can be a

traveling therapist and make more money. . .youtraveling therapist and make more money. . .you’’re on the road re on the road more often, but you don’t have to pay housing costs, so more often, but you don’t have to pay housing costs, so basically all the money you make goes in your pocket. . .I donbasically all the money you make goes in your pocket. . .I don’’t t want to have this loan for thirty years, I want to pay it off.want to have this loan for thirty years, I want to pay it off.

AvoidanceAvoidance

• How do students avoid taking out How do students avoid taking out loans?loans?

• Do students choose lower-priced Do students choose lower-priced options?options?

““Just a littl’ bit”Just a littl’ bit”

• . . .it was a pride thing. I wanted to get . . .it was a pride thing. I wanted to get through without the loans, but I also realized it through without the loans, but I also realized it was impossible. was impossible. 

• I thought, II thought, I’’ll borrow just a little bit. Now, itll borrow just a little bit. Now, it’’s s like, Oh, Ilike, Oh, I’’m gonna be in debt, so Im gonna be in debt, so I’’ll just ll just borrow some more.borrow some more.

• The expenses are dirt cheap [here], but what The expenses are dirt cheap [here], but what is so funny is that we’re all sitting here taking is so funny is that we’re all sitting here taking out loans because we can’t handle it [the out loans because we can’t handle it [the cost].cost].

““Credit Card Baby”Credit Card Baby”

• Actually, IActually, I’’ve charged my tuition, Ive charged my tuition, I’’ve charged my books, I charged my ve charged my books, I charged my food. [Even with] the amount of loan money Ifood. [Even with] the amount of loan money I’’m going to get this m going to get this semester, Isemester, I’’m still gonna be $100 in the hole, and thatm still gonna be $100 in the hole, and that’’s just rent, s just rent, electric, and phone. Thatelectric, and phone. That’’s not including food. Thats not including food. That’’s how Is how I’’m eating m eating this semester, by charging it on my credit cards. So, you get real good this semester, by charging it on my credit cards. So, you get real good at playing the interest rate game on credit cards.  at playing the interest rate game on credit cards.  

• Why do students use credit cards rather than student loans? Why do students use credit cards rather than student loans? Desperation. You donDesperation. You don’’t have to do paperwork. Avoid the confusion t have to do paperwork. Avoid the confusion and headaches. Itand headaches. It’’s easier. I know one person who had to because s easier. I know one person who had to because they didnthey didn’’t get their financial aid in time, had to wait about two months, 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 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. money came around, they spent the money on something else. 

• I always say you can tell who the freshman are because they push the I always say you can tell who the freshman are because they push the pull doors, pull the push doors, have umbrellas when itpull doors, pull the push doors, have umbrellas when it’’s raining. . . and s raining. . . and stop at the credit card tables in the student union.stop at the credit card tables in the student union.

FeedbackFeedback

• What do students say about policy What do students say about policy makers?makers?

• What do students say about federal What do students say about federal practice?practice?

““Logan to Logan to government center”government center”

• I’ve given up on the federal government doing anything I’ve given up on the federal government doing anything forfor us. These days I just hope they don’t start taking us. These days I just hope they don’t start taking things awaythings away

• There are so many people in high positions who came There are so many people in high positions who came out of academia. . .so, you know, maybe they need to out of academia. . .so, you know, maybe they need to be reminded about people in universities. “Look at be reminded about people in universities. “Look at where you came from and remember where it got you.” where you came from and remember where it got you.” The next generation of people like you may be denied The next generation of people like you may be denied their opportunity to go to Congress, or denied their their opportunity to go to Congress, or denied their opportunity to serve the government, simply because opportunity to serve the government, simply because they are working five jobs trying to pay off those debts.they are working five jobs trying to pay off those debts.

• The mindset that government can do everything needs The mindset that government can do everything needs to be eliminated.to be eliminated.

““Senator Speak”Senator Speak”

• . . .quit buying hundred dollar soap dishes for generals - . . .quit buying hundred dollar soap dishes for generals - they don't need them. Go to Wal-Mart and get them for they don't need them. Go to Wal-Mart and get them for $3 like the rest of us.$3 like the rest of us.

• It’s like we have nothing but buffoons in office now. It’s like we have nothing but buffoons in office now. They get in there and they’re strictly self-serving. They They get in there and they’re strictly self-serving. They work to propagate the good-old-boy system. . .like the work to propagate the good-old-boy system. . .like the Congressional pension; it’s ludicrous. They should have Congressional pension; it’s ludicrous. They should have a pension that should be equal to something you’d get in a pension that should be equal to something you’d get in business. . .I think we’re going to hit critical mass one of business. . .I think we’re going to hit critical mass one of these days where there is no longer gonna be anybody these days where there is no longer gonna be anybody there to pay the piper. You can’t keep deferring things, there to pay the piper. You can’t keep deferring things, like we’re putting things off now on the next generation.like we’re putting things off now on the next generation.

• The waste in the student loan program is a drop in the The waste in the student loan program is a drop in the bucket. Go after the rest [of the abuse] first.bucket. Go after the rest [of the abuse] first.

RecommendationsRecommendations

• Grants for low-income and first-gen Grants for low-income and first-gen studentsstudents

• Sticker price considerations for two-year Sticker price considerations for two-year studentsstudents

• Strategy (high tuition, high aid, etc.)Strategy (high tuition, high aid, etc.)• Loan forgiveness in strategic areasLoan forgiveness in strategic areas

Parting songsParting songs

““Help, I need Help, I need somebody”somebody”

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

quit.quit.

““Money can’t buy Money can’t buy you love”you love”

• I am an investment.I am an investment.• I hope to pay off my student loans I hope to pay off my student loans

before I die.before I die.• The benefit [of education] far outweighs The benefit [of education] far outweighs

the cost.the cost.

My little deuce coupeMy little deuce coupe

• I’ve got a truckload of debtload!”I’ve got a truckload of debtload!”