Of student loans, fact-checking, personal responsibility and perspective

On Friday, The Blade had an editorial bemoaning the cost of a college education.

They wrote:

This week, the New York Times made Ohio the poster child for the nation's student-debt dilemma. At Ohio Northern University, a small, Methodist-affiliated private university in Ada, students graduate with an average debt of $48,886.

Apparently, they don't bother to fact-check such data, as Tom Blumer, writing at Watchdog.org, did:

Of ONU, the Times writes: “Here at Ohio Northern, recent graduates with bachelor’s degrees are among the most indebted of any college in the country.”

It just so happens that yours truly has a relative who is attending ONU. That relative was quite offended at what Martin and Lehren wrote, reacting as follows to the “among the most indebted” claim:

“ONU has come under fire by many groups because our students graduate with more debt that most other colleges. They do not take into account that about 30 (percent) of our students are in pharmacy school which requires that you go 6 years (they get a Doctorate of Pharmacy Degree) at $40,000/year in tuition. And about 15% of our students are engineers. About a third of them ‘co-op’ where they basically intern for a whole year instead of doing classwork. This co-oping forces them to go 5 years total and thus incur another year of debt. These stats are not taken into account when ‘lists of worst colleges for debt’ are compiled.”

All other things being equal, of course a school at which almost half of its students attend for five years or more is going to have higher-than-average student loan debt. Martin and Lehren didn’t mention that mitigating factor, and should have.

So instead of reporting the truth and defending our state and it's colleges from smear tactics, our local paper jumps on the bandwagon and uses dubious statistics as a reason to bemoan 'poor college graduates who are too dumb to realize that when they borrow money it has to be paid back.'

Don't get me wrong, I'm not disagreeing with the fact that colleges and universities have plenty of room to cut costs and make a college education more affordable. Clearly there are costs, programs and even degrees that are not necessary - or are unproductive - and could be eliminated.

And yes, there are probably some parents who can save more for their chidren's education, but who don't. (Though why it is a 'given' in today's world that a parent must pay for a child's college education is beyond me. This is a relatively new trend.)

The editorial may be right when it says, "Too often, college marketers underplay debt and overplay career opportunities to fill classrooms."

The Blade is right when it says, "Public universities should focus on their original mission: to educate the state's young people, prepare them for careers in the modern world,..." though I disagree with the last part of that sentence, "...and equip them to be effective citizens." I don't believe it is the role of the 'state' or state colleges to teach people how to be effective citizens.

But there is a big disconnect in all these editorials, commentaries and news stories about student debt: personal responsibility and perspective.

Are we really graduating kids out of high school who do not understand the concept of loans and debt? Though now that I think it about, that may indeed be the case.

Do they really have parents who can't explain what incurring all the debt will mean upon graduation? Again, now that I think about it....

Too often, students borrow money they don't need. Rather than live at home, they choose to live in a dorm and borrow money for housing and food. Many choose to be a 'full-time student' without working to offset costs. Too often, parents encourage that approach. And too often, loaned money is used for things unrelated to the actual college education. Students often brag about how their spring break was paid for with their college loan money.

These are irresponsible behaviors and decisions - and they unnecessarily inflate the amount of debt a student has upon graduation.

Yes, I had student loans when I attended college. But I attended part-time for two years because I couldn't afford to pay for more classes. I also worked full-time and lived at home so I wouldn't have to borrow too much money.

And when bills like a car repair (for my very old, very used Ford Pinto station wagon), car insurance, books and tuition fees all fell in the same month, my parents, who were in a position to do so, did help me. But they didn't just give me the money - they loaned it to me, keeping a running tab. I was required to pay 'something' toward that debt every paycheck - even if it was only $5. Having that experience while in school certainly taught me about incurring debt and paying it off - and I was much better prepared than some are today for my college loan obligations after graduation.

We fail our children when we don't teach them such personal responsibility.

We also fail when editorials and commentaries and news stories along with politicians and parents continue to treat these adults like children by bemoaning the 'huge debt' that they now have and expect - one way or another - for that debt to just go away.

The Blade editorial says:

"Sixty percent of OSU undergraduates borrow to pay for college. On average, they owe $24,840.
...
Today, more than two-thirds of graduates get a loan-repayment book with their diploma. On average, new graduates owe $23,000."

According to FinAid, the federal college loan programs have a minimum monthly payment ($50 for Stafford Loans, $40 for Perkins Loans and $50 for PLUS Loans), though you can pay more to save interest costs. The loans also have graduated repayment plans (start off with lower payments and they get higher as your income increases) and repayment plans that are contingent upon your income.

So why is having such debt and being responsible for paying it off such a huge problem?

And here's something rarely mentioned in all the stories: a large portion of the debt is actually owed by the parents. PLUS loans are made to the parents - not the student. As FinAid explains (using 2007-08 data - emphasis added):

Among graduating 4-year undergraduate students who applied for federal student aid, 86.3% borrowed to pay for their education and the average cumulative debt was $24,651. (For just federal student loan debt, excluding PLUS Loans, the figures are 61.6% and $17,878.) Average cumulative debt increased by 5.6% or $1,139 a year since 2003-04. When one includes PLUS loans in the total, 66.0% of 4-year undergraduate students graduated with some debt in 2007-08, and the average cumulative debt incurred was $27,803. (About two in fifteen (13.5%) of parents borrow PLUS loans for their children's college education, with a cumulative PLUS loan debt of $23,298.)

Get that? Students only had an average debt of $17,878. It was the loans to the parents that increase the debt totals, yet have you ever heard it broken out that way?

Even if the college student doesn't understand the consequences of debt, certainly the parents should.

Additionally, there's a comparison to other debt that is lacking.

This article in Forbes.com, says that the average price of a new car in 2012 is $30,303. Autoblog reports that the average selling price of a new car in March 2012 was $30,748.

Both of these are higher than the average college debt that most students have, yet we think nothing of a new college graduate getting a car loan to pay for a new car.

How is it that we can be so callous about new car loans yet so outraged over less when it just happens to be college loan debt?

So let's put things in perspective:

* College and university costs have gone up and these entities could and should lower their costs by streamlining operations and eliminating programs/degrees that are unnecessary or unproductive. Not every college needs to offer everything to everybody.

* Government has contributed to the problem by taking over the college loan industry and offering more money as a result of rising tuition. This leads to both inefficiencies and burdensome rules (what does a government bureaucracy actually do well?) as well as to a vicious cycle of escalating costs and loans. Tuition goes up and government loans more money; more money is loaned thus colleges raise their tuition; repeat regularly.

* Students and parents have either been stupid, inattentive or willfully negligent in understanding the loan obligations and their own personal responsibility in the transaction.

* Actual student debt isn't anywhere near the size of the debt that the parents have assumed.

* Even with student and parent debt combined, it's less than the cost of a new car - and considerably less than the $40,000 car the politicians are pushing.

* The minimum payments on the loans are either $40 or $50, certainly not equal to the payment on a new - or even a used - car.

Given these facts, what is the crisis?

Isn't a college education more valuable, in the long run, than a new car? It certainly lasts longer.

Even in today's economy, do we really think that not being able to pay $50 a month toward your college loan is a dilemma that needs government involvement and action? Granted, $50 is probably not even enough to cover the interest, but I wouldn't expect that the $50 is all a student or parent would ever pay per month over the life of the loan. Certainly, as a student's income rises, they'd increase that amount, eventually paying off the debt.

This is only a crisis if you believe the hyperbole being pushed by politicians who want to offer a "solution," the 'lapdog' media willing to push the political agenda and whiny students who've not yet learned to be responsible for their own spending.