Much has been written about student loans. Typical of mainstream media and politicians, much of it is either flat-out wrong or at least misrepresented. I am a graduate of Ohio Northern Univ. and recently received an email with a letter from the President, Daniel A. DiBiasio. An ONU grad was featured in both The New York Times and NPR as an example of excessive student loans.
The Times article appeared in the May 13 Sunday issue and Kelsey Griffith, an ONU Class of 2012 graduate, was prominently featured because she had accumulated $120,000 in loans.
One sentence is very telling about the type of reporting you get in national media–“Because the article has been so widely distributed and omitted relevant facts, I am writing to provide important information the authors were given but failed to report.”
From DiBiasio’s letter:
First, I would like to address the article itself. It is not hard to feel very sympathetic toward Kelsey and the harsh difficulty she will have paying back such a huge debt. However, it is important to note that her level of borrowing is not typical.The New York Times article focused its attention on students with the highest debt. Those with a debt of $120,000 are outliers and are not the norm, either at ONU or nationally. Indeed, those with debt over $100,000 make up fewer than 3 percent of students nationally.
And yet, how is it that students can graduate from college with a debt of $120,000? Outside of a family’s particular financial circumstances, two factors can and do significantly raise a student’s debt load: changing majors and taking longer than four years to graduate. For example, the average debt for students with loans who graduate from the College of Business Administration in four or fewer years is $42,000. But for those who take more than four years, the average is $52,000.
What is most disturbing about the article and a related NPR story is the implication that the University advises students to ignore the sticker price and suggests they don’t need to worry about costs. ONU never has offered such advice nor suggested to students that they take a worry-free attitude about cost, and we never will. What we do tell our students is that very few pay the full price because so many receive financial aid, and that we will work with them to do all we can to make ONU affordable in light of their particular financial circumstances.
We do all we can to counsel families about the real costs of a Northern education and try to fully explain the options for paying those costs. The final decision about how to pay for the education comes down to the family. When the family chooses to go out to private lenders to finance their student’s education, the responsibility for that financial decision and its outcome falls primarily on the student and their family.
Another disturbing feature of the article is how it ignores those who manage debt effectively and are receiving the benefits of a college education and meeting their reasonable loan repayment obligations. Derek Thompson writing in The Atlantic fills the conspicuous void in the Times story when he writes:
College grads still earn more, work longer, and are employed at higher rates than everybody else. Their investment – that is, their debt – benefits the country at large in the form of a more-skilled workforce, higher productivity, higher GDP, more taxes, and so on. Newspapers can’t report on this part of the student debt crisis, because there is no headline statistic to report on.
All of these facts – our low default rate, our high placement rate, and our high ROI rate – together with efforts to identify students at financial risk and expand financial literacy activities, were shared with the Times reporter. None of them were included in the article.
DiBiasio's letter itself contains some dangerous and/or misleading information, too. He says that "changing majors and taking longer than four years to graduate" causes their debt load to be higher. But the fact is that 55% of college students take six or more years to earn a 4 year degree. and 40% of college freshman will never earn one. Therefore – for whatever reason – it is increasingly unlikely that a student will earn a bachelor's degree in 4 years. Almost half of the time, students will end up with loans and no degree at all.
But I think the most dangerous assertion is the popular myth that college graduates earn more. James Altucher does a much more eloquent and convincing job of debunking this than I do, so I'll just quote from his blog post 10 More Reasons Why Parents Should Not Send Their Kids to College: "Clearly anyone who states this has failed “Statistics 101” in college. We might know correlation but we don’t know cause-and-effect here. Since our generation (post-baby boomer) basically everyone goes to college except people who absolutely failed high school, then of course it makes sense that achievement-minded people make more money than individuals who are not achievement-oriented.
A better statistical study, which nobody has done, is take 2000 people who got accepted to Harvard 20 years ago, and randomly force 1000 of them to not go to college. Then, at the end of 20 years to see who made more money. My guess is that the 1000 who didn’t go to Harvard would’ve made more money. They would’ve been thrown out of the nest to learn how to fly that much earlier and a 5 year head start would’ve made enormous difference (I say 5 years because thats the average amount of time it takes to finish college. Not 4, as many think)."
And the ROI of a college degree has steadily plunged over the past 20 years. Since 1991, college tuition has increased at twice the rate of inflation or almost 50%. Compare that to the median income of a graduate, which has only increased 9.4% over that same period.
I'm not defending the Times article, but in my opinion we need to slay the myths of the requirement for a college education for everyone and get parents to think much more carefully about ROI – both financial and emotional.
Incidentally, a couple of weeks ago we entered new territory (again) in our country. For the first time ever, the number of unemployed with a college degree outnumbered those without. I call BS on DiBiasio's assertions of "high placement" and "high ROI." You notice he doesn't provide any figures for those.
Oops. Just noticed a typo: It is 25% who take 5 or six years, not 55%.
Jon, thanks for the comment. A couple of notes:
He was discussing ONU's experience, not universities in general, for the most part. For ONU in particular, the numbers hold.
Altucher can be contested, I believe. He did a great SEO thing with his headline, but I've seen statistics at least three times in the past month about earning power of college graduates. (Don't have time to find them right now.) However, there is debate, particularly in manufacturing, about the necessity of 4-yr degree versus 2-yr technical degree. It is possible to get a good job with decent pay with the latter degree.
The cost of a university education has skyrocketed. I'm very interested in concepts that feed off the Khan Academy model. Whenever costs rise too far, opportunities for entrepreneurs abound. Perhaps it is time for something disruptive in a university education. Perhaps the entire way we educate people.
I thought that was a high number ;-}
Both of my kids went to MAC schools. Both thought that the schools conspired to make sure that it took at least 5, if not 6, years to graduate. My daughter worked hard to finish in 4. My son took 10 (well, it's a long story, first he went off to pilot school, got a job as a pilot, then finished).
It appears that the smaller liberal arts schools are more organized to get you out in four. But it takes some gumption.