May 26 2012
Vicki E. Alger
Last year Education Sector found that it takes more student debt to produce a degree in this country. In other words, students are paying more for their degrees, but the colleges and universities aren't producing more of them.
Nationally, the average amount of debt it takes to produce a degree increased steadily during the three years studied, from $13,334 per credential in 2006-07 to $18,102 in 2008-09. Education Sector concluded:
The American higher education system is plagued by two chronic problems: dropouts and debt. Barely half of the students who start college get a degree within six years, and graduation rates at less-selective colleges often hover at 25 percent or less. At the same time, student loan debt is at an all-time high, recently passing credit card debt in total volume. Loan default rates have risen sharply in recent years, consigning a growing number of students to years of financial misery. In combination, drop-outs and debt are a major threat to the nation's ability to help students become productive, well-educated citizens.
As Education Sector’s Mary Nguyen explained, “Many of those who drop out are saddled with high loan payments even as they are more likely to be unemployed and earn less than their degree-holding peers…When they default, as many do, they experience devastating financial consequences.” Nguyen also identifies several troubling trends:
Student borrowing has increased to the point that a majority of freshmen at all institutions now borrow to pay for their education. …While borrowing is on the rise, dropout rates are also increasing. ....Borrowers who drop out face higher unemployment rates, lower median incomes, and higher loan default rates than those who graduated.
In other words, caveat emptor. Bloomberg Businessweek recently released their college return on investment (ROI) guide, calculated in terms of what students spent for their degrees and their likely earnings over 30 years. It found that private institutions did better than public, engineering programs dominated the top 30 ROI slots, and Ivy Leagues also dominated (high tuition was mitigated by generous financial aid). Overall, schools that graduate their students in a timely way also tend to keep their costs down and rank higher, as Businessweek explained:
On average, all 853 schools in this year’s ranking only graduate about 59 percent of their students, and less than two-thirds of those receive their degrees in four years. For the top 50 schools in the ranking, graduation rates are a big differentiator. On average, they graduate 88 percent of their students (compared with 51 percent for the 50 lowest-ranked schools) and 84 percent of graduates receive their degrees in four years (compared with 61 percent for the lowest-ranked schools).
Students should keep such factors in mind when choosing their schools.