I.O. University

— The back-to-college ritual stretches over generations. Alumni of all ages can recall the end-of-summer farewell to families, the return drive to campus, the move into dorms, and the reunion with other returning friends and students prior to the first day of class.

But modern students are all too often bringing something else back to college: IOUs.

Two-thirds of college seniors in 2010 carried student loans, with an average balance of $25,250, according to The Project on Student Debt website. The total student outstanding loan balance surpassed outstanding consumer credit-card debt two years ago and now stands at a staggering $1 trillion—more than double what it was just eight years ago. Tuition and fees have risen sharply in higher education, outstripping other sectors like housing, health care and energy.

Fewer than one in three college students graduate in four years, and only about half of freshmen wind up with a degree in their hands after six years. High dropout rates, worsened by the first time the unemployment rate ever exceeded four percent for college grads last year, have contributed to loan payback problems.

Few states know those challenges better than Arkansas, which has the second-highest student-loan default rate in the nation. (In this instance, the cliché must be modified to “Thank Goodness for Arizona.”)

It’s not a pretty picture for today’s junior high and high school students, who are destined to become tomorrow’s college students. The loan sums at play for higher education create huge conflicts of interest for universities, some of which exploit the easy availability of federal dollars. The dynamic is backwards. Binding student loans, which can’t be discharged even in bankruptcy filings, can wind up suffocating dropouts because they are based mostly on the promise of a degree, not the attainment of it.

It’s a wacky system to begin with that realizes the high rate of incompletion by students, yet still facilitates loans without any performance guarantees—knowing full well and in advance that a sizable percentage on average (9 percent overall last year) are going to default.

An outfit called Education Sector has come up with an innovative way to compare colleges based on debtto-degree costs. The measure, called the “borrowing-to-credential ratio,” essentially calculates how much borrowed money it takes at any given college to get a degree.

What Education Sector authors Kevin Carey and Erin Dillon found was that the borrowing-to-credential ratio was growing rapidly—increasing nearly 36 percent from 2006-2007 to 2008-2009 across all college divisions to just over $18,000 in undergraduate federal student loans.

Narrowed to specific institution categories, a glaring disparity arises. Not surprisingly, the lowest ratio (average $16,247) is found at public four-year universities, which are typically state-subsidized and greatly affected by individual state policy.

But the ratio for

for-profit colleges averaged $43,383. With a

computed average that high, obviously some for-profit institutions had to be higher. Education Sector found some astonishing borrowing-to-credential figures: The Apollo Group, parent company of the University of Phoenix, produced a $48,107 ratio, while Strayer Education’s was more than $66,000. Popular DeVry University’s ratio was just over $50,000. The kingpin in the for-profit college universe is Bridgepoint Education, where the debt-to-degree cost exceeds $140,000 in federal student loans.

The high borrowing-to-credential ratio for for-profit colleges is particularly bewildering given the fact that more than half of the degrees they produce are two-year associate programs or other shorter-term credentials.

Debt-laden graduates—or worse, dropouts—can create lifelong financial hardship. The aggressiveness with which some for-profit colleges recruit with federal financial aid could be considered predatory lending on students left unaware of the costs they are assuming and their payback obligations.

New federal regulations require price calculators on college websites to help create awareness and expectations for students and parents in terms of what certain degrees cost to acquire and what kind of salaries graduates are earning.

One of the best strategies to remedy the rising debt tide among students would be to focus more on outcomes when it comes to evaluating and funding colleges and universities. If affordability and value are truly the standards universities should strive for, measures like borrowing-to-credential ratios and degree-completion need to become the touchstones for comparison.

Finally, the involvement of businesses as direct funding entities for their own work forces can create a financial incentive for both student and educational institution. The format could be a modern-day version of the old apprenticeship programs, in which businesses invest in employee training and in return, the employee repays the business with loyalty and reducedrate employment.

The report on last year’s Arkansas Challenge lottery scholarships revealed that 41 percent of recipients had lost their scholarships.

It’s in everyone’s interest that colleges educate students without saddling them with crushing debt, that university students strive to complete their degrees in prescribed timeframes, and that our finite education resources are used efficiently—and innovatively.

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Dana Kelley is a freelance writer from Jonesboro.

Editorial, Pages 19 on 08/31/2012

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