The Debt Dilemma

In the wave of announcements of funding cuts to education on national and state levels, the media buzz is loud and clear about what college graduates look forward to in both the job market and in terms of loan debt.

Mainstream outlets have covered the topic, while education-related organizations such as the College Board dedicate large portions of their websites to the subject. Tuition at IUP and its state-owned sister institutions in the Pennsylvania State System of Higher Education has increased 13.2 percent in the last five years and is expected to increase again this year, in answer to recent state budget cuts.

“When I was young and going to school, the state would have kicked in 70 or 80 percent of the cost of the education, and the rest would come from tuition, so tuition would be very low.” 
—Willard Radell

“States are not spending as great a share of the cost of students’ education as they used to,” said Willard Radell, an IUP Economics professor. “When I was young and going to school, the state would have kicked in 70 or 80 percent of the cost of the education, and the rest would come from tuition, so tuition would be very low. Today, it’s very difficult for students, because state legislatures have been scaling back the amount of money and kicking in only about 34 percent. The rest of the burden is on the students, and it’s very difficult to work your way through school without borrowing.”

According to the Project on Student Debt, the average student debt, on a national level, increased to $24,000 in 2009, a 6-percent increase from 2008. At the same time, unemployment for recent college graduates increased from 5.8 percent in 2008 to 8.7 percent in 2009.

Willard Radell

Will Radell

Many believe the problem of student loan debt is confined to those who choose to enroll in high-priced private schools—that the problem is not one for graduates of public colleges and universities, schools that traditionally cost less to attend.

That perception, with some quick research, is easily proved wrong.

Graduates of universities considered IUP’s peers for the purposes of evaluation by the State System carry an average debt load of $21,392.33. Among those peers are Ohio’s Bowling Green State University, Illinois State University, Louisiana Tech University, the University of Maryland–Baltimore County, and SUNY at Binghamton.

Graduates of randomly selected Pennsylvania private institutions carry an average debt load of $23,109.75. Bryn Mawr College, Bucknell University, Carnegie Mellon University, Franklin and Marshall College, Gettysburg College, and the University of Pennsylvania are among the schools included in this average.

The average recent IUP graduate carries a debt load of $25,224. Graduates of Penn State University, considered a land-grant university and therefore related to the Commonwealth of Pennsylvania, carry an average debt load of $28,680.

Patricia Curran McCarthy ’89, IUP’s assistant vice president for enrollment management and financial aid director, said there are various reasons graduates of peer and private schools have lower debt.

“We don’t, for example, have a pot of money to automatically award scholarships upon admission to students who have a certain grade point average and SAT score”
—Patricia McCarthy

“Many schools, particularly the private schools, make commitments to students when they enroll to cover a certain amount of their tuition,” McCarthy said. “I’m sure you’re looking at the data and wondering why these more expensive schools graduate students with less debt than schools like ours, with relatively lower costs. But, you have to look at each school differently and look further into their statistics—how many of their students have the ability to pay, what percentage of their students receive grants, how many of the schools have high endowments—and see what the unmet need is of their students. If you look at the Ivy League schools, you’ll see they are committed to keeping student debt down, and they’re achieving that through providing scholarships through their endowments.”

IUP, she said, simply does not have that kind of funding at its disposal.

Patricia McCarthy

Patricia McCarthy

“We don’t, for example, have a pot of money to automatically award scholarships upon admission to students who have a certain grade point average and SAT score,” she said, acknowledging that many schools do.

McCarthy and her staff work to counsel and educate students and their families about their many options and are also now focusing on financial literacy. One of the options they suggest is work study, although she said IUP’s federal-work study allotment has stayed the same during her six-year tenure as financial aid director—a span that has seen the university’s enrollment increase by nearly a thousand students.

Generally, students find it more difficult to find employment, and when they do, it usually does not pay enough to enable them to borrow less.

“Back in my time, it was possible to work your way through school,” Radell said. “The minimum wage, in real terms, was higher than it is today—adjusted for inflation. So, an hour of work for students really isn’t going to buy them as much.”

Radell said debt overhang—high levels of debt upon graduation—greatly hinders the ability of recent college graduates to buy homes and achieve financial independence.

“It presents a burden,” he said. “It delays family formation. One of the things that prevents people from getting started and living on their own is the amount of debt they have. I know [funding agencies] stretch out payments for a long time and try to keep payments reasonable, but, nevertheless, debt puts a damper on students’ ability to easily make a living after they get out of school.”

Photos by Keith Boyer