New York Observer: Interviews on student loan debt

New York Observer Education

Marina Gerner spoke with Thomas Blum, Vice President of Administration at Sarah Lawrence College and Roseanne Ackerley, Director of Financial Aid at Hebrew Union College, about the financial woes of students today and the status of educational loans in America.

How has new student loan legislation impacted the university financially?

Thomas Blum: We have not seen any financial impact, at least to date, associated with any of the regulatory or legislative actions taken. As a college we are disappointed that Washington has not been able to sort out a more permanent solution. Less than a year from now on we are going to be in the same situation. There are other changes that are being planned. The Department of Education is negotiating new regulations around student loans, in particular addressing the difficulty of students paying back their loans after graduation.

This morning new regulations were issued regarding payback plans for students in difficult situations to provide new mechanisms to reduce the amount of student loans.

Roseanne Ackerley: Well, we have a needy student fund that we use for our scholarships. And even though the results are not in yet, because students apply throughout the summer and the committee will meet in the fall, I believe that a lot more students will be applying for scholarship help.

What are you hearing from students?

AR: They are very upset about the situation. We have a 5-year-seminary program, so if a student takes out 20,500 in federal loans for the full five years, that’s over $100,000 in debts afterwards, having the interest on top. Not having loan subsidies and rebates affects the students’ aggregate loan amounts. It is troublesome. Our Board of Governors has met and formed a student welfare committee trying to assess what the school needs to do to help our students.

The investigation is to reach out to other schools, analyze what they are doing and trying to put together something like that or a new strategy. The Board of Governors is working on it, but we don’t have all the answers yet.

TB: Students were very pleased that at least for one year we have got an extension on the interest rate on federal student loans, keeping those rates at the lower level instead of returning them to 6.4 percent. If that deal had not been struck, our students would be looking at 1,000 dollar more per-year in loan pay back. That would not be a good situation.

How has it alleviated student financial concerns, if it has at all?

TB: It will help, but it doesn’t go all the way. It is a good start. It links ability to pay back to actual income in the form of income based repayment plans and this is a move in the right direction. A challenge here will be the cost, because there is an estimated addition to the deficit associated with these plans. It is a very small addition to the overall deficit, but these days everything seems open for debate. I hope these changes/ improvements will survive and will make it out of negotiation state to become real. They will benefit all our students who have federal loans. It is hard to say that there’s anything wrong resulting from the regulations that we have seen so far.

RA: The other thing I wanted to say is that we are now rolling out a financial literacy program. That way our students can become more financially savvy, take out less in loans, and bring down their overall debt. We have in-house scholarships and there are also out-of-house scholarships that I put together for our students in need. The outside scholarships have doubled in the last year; twice as many students receive outside scholarships now compared to last year… It’s about 20% now. I know it’s not high, but still twice as many.

Are there any further changes that you anticipate?

TB: Broadly speaking, there are higher education issues that still need to be addressed. We don’t hear too much about burden on parents, but the loans and home equity borrowing that they take out burdens them substantially. Since 2008 when home equity started to dry up, it has become harder for families to make it all come together. I would anticipate that we are nowhere near the end of the conversation on loan debt as it relates to higher education. The conversation about value will continue to be front and center for a good number of years, certainly until the economy has recovered. We have expended an awful lot of effort as we continue to demonstrate the value that comes with a liberal arts education. It is the best way to prepare for an economy where change is the only constant. The liberal arts students that we graduate are flexible, adaptable, and ready to take on challenges. We have given them that skill set. We are doing our best to help our students to find the best balance between grant aid, student loans, and family resources.

How does the loan and tuition structure in the United States compare to your own college days?

RA: Obviously, I had subsidized loans when I was in school. The two things that are different now are that we have income-based repayment programs and we also have loan forgiveness programs. We didn’t have these when I was in school, so I will be paying a lot for another 20 years. The good thing is that the government is offering loan forgiveness programs. The bad thing is that they are taking away funds from grad students. Tuition wasn’t as much when I graduated 10 years ago. Now tuition has doubled meaning students need to take out more in loans. Graduate programs are more expensive and students need more funding compared to undergraduates. It is a shame, because it means that our government is not valuing our students who are in grad school. You would think that we want to promote higher education, but by taking away subsidies we are negating this premise and that is a problem.

TB: I love that question! You know, loans were not as available as they are now. I went to college in 1982. There were federal loan programs but accessibility to the programs and the amount of support was much less than it is today. There are a lot of reasons right now to be concerned about extension in student loans. My take is that it reflects changing demographics, an increase in the number and percentage in students increasingly going into education – it is a social good. Loans are a form of public investment into citizens and residents of the U.S. If loans help us to educate as many students as now, I see many benefits. A caveat is that it would have been better from a policy perspective if we found a way to support students with grant aid rather than with loan aid. Given the political realities there is something to be celebrated in the loan volume.

People always talk about the ‘trillion dollar’ student loan debt. This is more than credit card debt, more than automobile loan debt and the sky is falling. I believe that these comparisons are not fair by any means. Credit card and automobile debt are about consumption, whereas taking a student loan is about investment that will have a return. One trillion dollars is an easy number to focus on. Underneath t is the fact that since mid-1990s, there has been a 50 percent growth of students in higher education and that is only for the good.

Circling back to 1982 when I was at college, we had programs but they were not as heavily utilized. A college education did cost less. I can say from my personal experience, I was fortunate enough to have parents who could afford to pay the tuition of my college. But the way many of my closest friends paid was not through student loans but by going into ROTC – in exchange for commitment to serve in the military, the pentagon would finance their education. I have thought back on that a lot, it was a very good program that educated very bright people and brought them into the military, which was not a bad thing. But while the individual has a lot of choice in how to finance education now, there was such little choice then. While there is nothing wrong with military, I am not certain that all my friends would have gone to ROTC. Now there is much more choice for the individual than 25 years ago and it is important to keep that in mind.

Originally published in the New York Observer, September 2012

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