Student Loans: You've Got Questions, We've Got Answers

Apr 23, 2017
Originally published on April 23, 2017 7:07 am

With student debt at a staggering $1.3 trillion, many families are facing a huge financial dilemma: Their final springtime decisions about college enrollment and acceptance. The NPR Ed team teamed up with Weekend Edition to answer some listener questions about debt and degrees.

Waiting on the numbers

Marcy, from Union City, N.J. has twin girls going off to college in September.

"My question is: Why is it that universities and colleges wait so long to give the financial aid package? First deposits are due May 1 and we still haven't received the financial aid packages for half the schools that accepted my girls."

This is a common complaint. Colleges are increasingly practicing what's called "enrollment management." They are trying to assemble an incoming class that is as talented and high-achieving as possible, to ensure the college's prestige, but also the one that will contribute the most revenue. In addition, colleges have to predict how many of the students they accept will actually enroll, which is more difficult these days since many students are applying to more colleges than ever. When it comes to private colleges, nearly 90 percent of incoming freshmen get some kind of discount, hovering over 50 percent of the cost.

But this lack of transparency in pricing is especially hard for families who are feeling the pinch economically.

Middle class squeeze

Abby Goldfarb of Dallas has a daughter about to enter college this fall. And here's what she thinks of the financial aid landscape:

"The wealthy in this country are able to write checks and cover the cost of tuition ... and colleges are very, very generous to people making under $60,000 a year in this country. And heaven forbid you're making in that middle-class $100,000 a year range."

Almost everyone has trouble paying for college. It is true that middle-class families are less likely to qualify for need-based Pell Grants, and can't pay out of pocket the way the wealthiest families can. But, a mitigating factor is that middle-class students are more likely to finish their degrees and pay off their loans, compared with low-income and first-generation college students.

New York state's recently announced free-tuition plan has been pitched quite consciously at the middle class. It is designed to cover families earning up to $100,000, rising to $125,000 once fully phased in.

Don't know much about philosophy

Heather Feaga wrote to us on Facebook:

"Don't ever get student loans. Period. And don't get a degree in art, or philosophy, or history, or something that you will very unlikely get paid real money for."

It's true that there's a relationship between college major and your projected earnings after graduation. Engineering grads top the list.

But it doesn't necessarily follow that everyone should rush into technical fields, or choose any college major based on earnings alone. For one thing, economists will tell you that the right "fit" between a person and a job is a key driver of success and productivity. One example: When people graduate in a recession year it drags down their earnings long term, and one reason is because of job mismatch — people are desperate and take the first job they can find.

Plus, recent research by the Association of American Colleges & Universities, a trade group, found that humanities and social science majors closed earning gaps with their business-major classmates by mid-career.

More than just four years

Aaron Smith, of Akron, Ohio, teaches English composition at a four-year college.

"There are a lot of students who seem to feel like they have to be there, and a lot of times I feel like they honestly don't know why they're there. And my advice to students is: You do not have to believe the urban myth that you have to go to college. There are other options. There's lots of need for skilled jobs ... I have an advanced degree and a lot of people — plumbers, mechanics, carpenters — they make more money than I do."

Professor Smith has a point.

According to the Bureau of Labor Statistics, some of the fastest-growing occupations in the whole economy fall into the non-bachelor's-degree category. This includes the single fastest-growing job in the country right now, wind turbine technicians. They earn over $50,000 a year, no college degree required. Other fairly well-paid examples are health care trades requiring a two-year degree, such as occupational therapy assistants and physical therapist assistants.

Got questions for us on student loans or the cost of college? Tweet us at @npr_ed or email npred@npr.org.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

LYNN NEARY, HOST:

And this is The Call-In. For many high school seniors, the deadline for deciding where to go to college is just around the corner, and that means grappling with the price of tuition. We asked you to share your experiences with financial aid and student loans.

ABBY GOLDFARB: We are looking at, minimally, a $40,000 debt. And we have been saving since the day she was born.

AARON SMITH: Personally, I don't wish I had taken a different path. But it's hard keeping up with the student loan payments with the money I do make.

MARCI: I know everything's a business, but I'm hopeful that they would make things easier for us.

NEARY: Anya Kamenetz of NPR's Education team joins us to talk through some of these calls. Thanks for being with us, Anya.

ANYA KAMENETZ, BYLINE: Thanks for having me.

NEARY: Well, let's start with a question from Marci from Union City, N.J. She has twin girls who are going off to college in September.

MARCI: My question is - why is it that the universities and colleges wait so long to give the financial aid package? First deposits are due May 1, and we still haven't received the financial aid packages from half of the schools that accepted my girls.

NEARY: Anya, is that a common complaint?

KAMENETZ: It is. You know, colleges are going through a very complex process. They actually offer degrees in what's called enrollment management, which is the art and science of assembling a class that is prestigious but also will maximize their revenue for the college. And they want to make sure that they're going to get the best class that they can. It's very difficult and a big burden on families, particularly families like Marci's that applied to a number of different schools. And in fact, that's part of the problem as well because colleges can't be certain of exactly who is going to accept their acceptance.

NEARY: Yeah. And it is pretty late in April, I have to say, if those first deposits are due May 1. So when would somebody be expecting to hear? They're going to wait till the last minute?

KAMENETZ: I mean, that tends to be what happens. And often oftentimes as well, when the letter does come, it can be pretty hard to figure out exactly what is a loan, what is a grant and what your final cost is going to be.

NEARY: That's right. I think a lot of people don't understand the school will give you X amount of money, and then you can borrow X amount of money. So when they're talking about an aid package, it's not like free aid. It's like they're telling you how much debt you can take on.

KAMENETZ: Right. The financial aid package is a little bit of a euphemism because the largest subset of what we call aid is actually a loan, which is something that of course you have to pay back. And so when you are getting those financial aid packages, even if it is at the last minute, you have to take - you know, have a gimlet eye and go over them and really decode them and say, well, this is how much I'm actually borrowing. These are federal student loans. Hopefully, I'm not taking out private student loans. And then this is going to be a grant or a scholarship.

NEARY: All right, let's move on to another listener.

GOLDFARB: My name is Abby Goldfarb. I live in Dallas, Texas.

NEARY: Now, Abby has a daughter about to enter college this fall also. And here's what she has to say about the financial aid landscape.

GOLDFARB: The wealthy in this country are able to write checks and cover the cost of tuition. And colleges are very, very generous to people making under $60,000 a year in this country. And heaven forbid you're making in that middle-class, $100,000 a year range where you have two working professionals but just - who don't make a huge amount of money.

NEARY: Is Abby right, Anya? How do middle-class families fair when it comes to these financial aid packages and student loans?

KAMENETZ: You know, I think paying for college is a struggle for most families out there. And the middle class - you know, Abby has a point there. They're much less likely to qualify for need-based Pell Grants. They're oftentimes choosing the four-year colleges that may not be as inexpensive as, say, a community college. And so they do often rack up larger amounts of debt in this sort of - the range that Abby's talking about.

NEARY: Well, you know, you have reported that the total balance of student loan debt has nearly tripled in the past decade...

KAMENETZ: That's right.

NEARY: ...To 1.3 trillion. Let me repeat that - we're not saying million. We're not saying billion - we're saying $1.3 trillion. That seems incredible to me. What is driving that?

KAMENETZ: Well, a lot of things are driving it. That's why it keeps going up. You know, there has not been a concerted effort on the part of colleges and universities to reduce the tuition that they charge. Colleges are competing with other colleges on perks. They're competing, oftentimes, you know, to get the best students but not necessarily on the price. And as long as there is subsidies in the form of student loans, a lot of people will say, you know, if you can access debt that is lower interest than perhaps, you know, consumer debt, then you're going to go ahead and borrow.

And, you know, families are finding that a college degree still does pay off. We're not yet at that point where it doesn't pay to get a degree. But the burden gets harder and harder every year. And, you know, from my cohort of parents of younger children, we're looking at the projections out 10, 15 years from now and just saying, this is not sustainable.

NEARY: And now for a final thought from Aaron Smith of Akron, Ohio. He teaches English composition at a four-year college. Here he is.

SMITH: There are a lot of you students who seem to feel like they have to be there. And a lot of times, I feel like they honestly don't know why they're there. And my advice to students is, you do not have to believe the urban myth that you have to go to college. There are other options. You know, I have an advanced degree. And a lot of people - plumbers, mechanics, carpenters - they make more money than I do.

NEARY: So is it really an urban myth that you have to go to college?

KAMENETZ: You know, I really - I sympathize with what Professor Smith is saying. I actually went and looked up the fastest-growing jobs in the U.S. economy. And the No. 1 on the list right now is wind turbine technician.

NEARY: (Laughter).

KAMENETZ: And that is a job that pays over $50,000 a year and requires on-the-job training. You don't even need an associate's degree for it right now. So there is a certain number of health care trades that require associate degrees with a lot of openings that pay pretty well. You can find those niches, and I think it's really important for us to recall and remember that college doesn't have to be four-year college - that we need to think about two-year degrees and certificates. There's a diversity of options out there. And the key, I guess, is to think about what is the right option for you as a student. I think that's what most experts will tell you.

NEARY: Anya Kamenetz of the NPR Ed team, thanks so much for speaking with us.

KAMENETZ: Thank you, Lynn.

(SOUNDBITE OF CORDUROI'S "MY DEAR")

NEARY: And next week on The Call-In, we want to hear from veterans, specifically about your experiences with the VA. What's it like to get health care? Are there long wait times? What questions do you have about your health care options? Call in at 202-216-9217. Leave us a voicemail with your full name, where you're from and your experience, and we may use it on the air. That number again is 202-216-9217.

(SOUNDBITE OF CORDUROI'S "MY DEAR") Transcript provided by NPR, Copyright NPR.